Tax Bulleting - November 2013


The primacy of EU law over Spanish law no longer appears to raise any doubts and there are numerous judgments from Spanish courts which, based on this principle, set aside administrative decisions which, although in keeping with Spanish law, infringe EU law.

A good example of this can be seen in the recent judgments by the Madrid High Court on November 19, 2013 in which the Court disapplied the Nonresident Income Tax Law in order to afford the same tax treatment to a taxpayer residing in Sweden as that which would have applied to a taxpayer residing in Spain. Specifically, these judgments granted the right to a refund of the tax withheld on the dividends obtained in Spain by a foundation that was tax resident in Sweden, affording it the same tax treatment as that applicable to comparable Spanish foundations. The judgments also recognized the right to late-payment interest, which began to accrue when the withholding tax was paid over to the public treasury.

The Court held categorically that both situations are comparable on the ground that comparability does not require the circumstances between the resident and nonresident taxpayers to be absolutely identical. The key factor is whether the resident and the nonresident find themselves in an objectively comparable situation. In addition, the Court held that late-payment interest starts to accrue as soon as the tax infringing EU law is paid over to the public treasury, as in the case of claims for refunds of tax that has been paid incorrectly.

The importance of these judgments goes beyond nonresident foundations, as there are two important issues that can be extrapolated to many other nonresident taxpayers in cases where EU law is infringed, who are claiming refunds of taxes withheld on dividends obtained in Spain: first of all, the issue of late-payment interest and, second, the issue of the sufficiency of the withholding tax certificates produced as evidence.


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