Tax Newsletter - July 2014
The Supreme Court has just handed down three interesting judgments which we discuss in this newsletter:
1. In the judgment of June 18, 2014, in cassation appeal 1933/2011, the Court analyzes (along the same lines as in its well-known judgment of January 12, 2012) the concept of permanent establishment in a case where, after a business reorganization, activities formerly carried out in Spain by a subsidiary of a multinational group are taken over by the nonresident parent, with the subsidiary being in charge of apparently ancillary or preparatory activities to those of the parent.
Specifically, in this case, after the reorganization, the parent resident in the United Kingdom started to sell in Spain and Portugal the products previously sold by the subsidiary, whose activity became confined to the processing and storage of the parent company’s products and to the promotion of the parent’s sales. The National Appellate Court had ruled that the presence of the nonresident entity did not lie in ancillary or preparatory facilities given that, although individually considered, those places were used to store or process the goods, that was not the sole purpose of the structure nor did the structure as a whole have that ancillary nature.
The Supreme Court backs up that conclusion highlighting the continuity of the activities that were already being performed by the group in Spain before the restructuring that gives rise to the permanent establishment.
2. In the judgment of June 30, 2014, in cassation appeal 2164/2013, the Supreme Court confirms the view of the National Appellate Court (contrary to the view of the Central Economic-Administrative Tribunal) on the obligation to pay new late-payment interest in case of delay in the payment of the interest accrued in a tax refund.
In particular, in the case analyzed by the Court, the entity had received a refund without late-payment interest because the tax authorities had considered that it was a refund derived from the management of the tax. After the relevant claims, the Central Economic-Administrative Tribunal (“TEAC”) upheld the taxpayer’s right to that interest, but when the TEAC’s decision was enforced, the taxpayer only received interest up to the date on which the tax was refunded. However, the payment of the interest was made three years after that tax refund was made. The Supreme Court, making a reasonable interpretation, upheld the appropriateness of the accrual of late-payment interest on the actual late-payment interest not paid on a timely basis.
3. Lastly, in its judgment of July 4, 2014, in cassation appeal 581/2013, the Court held that a finding of fraud cannot be made in transactions carried out in a statute-barred year not inspected, even if the transaction has effects in open fiscal years subject to inspection. Otherwise, according to the Court, the tax authorities could reopen, without time limits, the inspection of transactions carried out in statute-barred years (the data and figures of which have become final) in order to alter the tax treatment, thereby disregarding the principle of legal certainty and contradicting the concept of statute of limitations. In this judgment, the Supreme Court also maintains this conclusion in relation to the inspectors’ authority to review the tax losses generated in statute-barred years.
I. CASE LAW
- 1. Corporate income tax.- Transactions carried out in statute-barred years cannot be reviewed even if they have effect on the tax base of open periods (Supreme Court. Judgment of July 4, 2014)
- 2. Corporate income tax.- The tax inspectors cannot judge the validity of notarial acts (National Appellate Court. Judgment of March 27, 2014)
- 3. Nonresident income tax.- A nonresident company that makes use, through its subsidiary, of a warehouse from which to make sales, has a permanent establishment in Spain if the subsidiary performs other processing and agency activities in relation to the goods sold (Supreme Court. Judgment of June 18, 2014)
- 4. Inheritance and gift tax.- The tax authorities must sufficiently reason the assessment to enable the taxpayer to know the legislation and calculation methods applied (Extremadura High Court. Judgment of March 6, 2014)
- 5. Tax on the emission of greenhouse gases into the atmosphere.- Legitimacy of autonomous community non-fiscal taxes and absence of overlapping with economic activities tax (Supreme Court. Judgment of June 19, 2014)
- 6. Collection proceeding.- If the tax authorities delay the execution of a refund, the late-payment interest must be calculated on both the principal and on the interest that should have been paid on time (Supreme Court. Judgment of June 30, 2014)
- 7. Review proceeding.- The notice of a correction of errors in relation to a decision opens a new period to appeal against (National Appellate Court. Judgment of March 27, 2014)
- 8. Review proceeding.- It is possible to furnish documentation with the appeal for reconsideration that was not furnished in the inspection (Andalucía High Court. Judgment of January 2, 2014)
- 9. Administrative proceeding.- On the declaration of joint liability in relation to events carried out by a different legal entity (Supreme Court. Judgment of June 20, 2014)
II. DECISIONS AND RULINGS
- 1. Corporate income tax.- Tax losses to be considered when their amount has been questioned by the tax inspectors (Directorate-General of Taxes. Ruling V1296-14, of May 14, 2014)
- 2. Corporate income tax.- On the licensing of intangible assets pursuant to a framework agreement executed while the former wording of article 23 of the Revised Corporate Income Tax Law was in force (Directorate-General of Taxes. Ruling V1232-14, of May 7, 2014)
- 3. Personal income tax.- Requirements for the tax credit for renovation of the habitual residence (Central Economic-Administrative Tribunal. Decision of July 3, 2014)
Personal income tax.- “Inbound expatriates” regime: obtaining exempt salary income triggers the exclusion from the regime (Directorate-General of Taxes. Ruling V1405-14, of May 27, 2014)
- 5. Valuation procedure.- It is not possible to indirectly contest the comparative appraisal of properties for determining cadastral values through an appeal against an individual cadastral value (Central Economic-Administrative Tribunal. Decision of June 12, 2014)
- 6. Penalty proceeding.- The proceeding is appropriate when the self-assessment is filed after receiving an official request in a monitoring procedure (Central Economic-Administrative Tribunal. Decision of July 3, 2014)
- 7. Penalty proceeding.- On the maintenance of the 25% reduction in cases of request of deferral/split payment (Central Economic-Administrative Tribunal. Decision of June 25, 2014)
- 8. Penalty proceeding.- In case of late filing of an appeal or claim, the stay should also be granted and maintained until the decision is final in the economic-administrative jurisdiction (Central Economic-Administrative Tribunal. Decision of May 29, 2014)
- 9. Inspection proceeding.- The verification of census obligations is an inappropriate proceeding to verify the veracity of facts in certain transactions (Central Economic-Administrative Tribunal. Decision of June 17, 2014)
- 10. Administrative proceeding.- Appeals or claims filed to obtain a declaration of time-barring do not toll the statute of limitations of the tax authorities’ right to determine the tax debt (Central Economic-Administrative Tribunal. Decision of June 17, 2014)
- 11. Data verification proceeding.- The inappropriate use of this proceeding results in its nullity or voidability (Central Economic-Administrative Tribunal. Decision of June 17, 2014)
- 1. Regime for shipping entities based on tonnage
- 2. Single Administrative Document (SAD)
- 3. Forms 322 and 353, monthly self-assessment under the special VAT system for groups of entities. Form 309, non-periodic VAT return
- 4. Urgent tax measures
- 5. Spain-Dominican Republic tax treaty
- 6. FATCA agreement between Spain and the United States. Order approving the annual informational return on financial accounts
- 7. Tax treatment of preferred shares and of certain debt instruments
- 8. Compatibility of the reductions in the social security contributions of research personnel with the R&D&i tax credit in corporate income tax
IV. OTHER ISSUES
- Tax reform: measures submitted for public consultation