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Tax Newsletter - June 2018 | Case Law

Spain - 

Selección de las sentencias más relevantes en materia tributaria de la Newsletter de Tributario de Abril de 2018.

Corporate income tax

Adjusting the value of related-party transactions only with non-established companies does not undermine freedom of establishment

Court of Justice of the European Union. Judgment of May 31, 2018, case C-382/16

The German tax authorities made a value adjustment in relation to a guarantee provided by a German company to a related company established in another member state, by arguing that the agreed terms for the transaction departed from those that would have been agreed between independent third parties.  German legislation, however, does not require related-party transactions to be priced at arm’s length where they are performed between companies resident in Germany. The CJEU concluded in this judgment that the difference in treatment under this legislation is not contrary to the freedom of establishment.

Corporate income tax

Interest on the portion of a loan equal to a net equity deficiency from earlier departure of shareholders is not deductible

National Appellate Court. Judgment of March 26, 2018

The National Appellate Court concluded that the interest on a participation loan provided by  a related entity to rescue the borrower from a ground for dissolution after a net equity deficiency arose from a capital reduction with repayment of contributions (due to a few shareholders pulling out) is not deductible.

The court held that in these cases the outgoing shareholders are the real beneficiaries of the financing, by having their contribution repaid out of the company's reserves, and so the deduction of finance costs precisely in the amount of the net equity deficiency arising from that repayment is not allowable.

Inheritance and gift tax

If an heir dies without accepting an inheritance one taxable event occurs

Supreme Court. Judgment of June 5, 2018

The Supreme Court corrected its theory regarding cases where an heir dies without accepting an inheritance. The court now construes that in these cases only one acquisition by inheritance occurs, that by the heirs of the latest person to die. Accordingly, inheritance tax only arises on this one and only acquisition.

Inheritance and gift tax

The tax authorities may not audit the value of real estate if it is the value published by the tax authorities

Supreme Court. Judgment of May 21, 2018

Article 57 of the General Taxation Law sets out several methods that the tax authorities may use to audit the value of assets, income, proceeds and other elements determining the tax obligation. One of these methods is to make an “estimate by reference to the values appearing in official tax records”.

And the Supreme Court has now determined that if the taxpayer himself uses those values to calculate his inheritance tax, the tax authorities are not allowed to change them. In other words, the tax authorities may not “audit” a value that the taxpayer has determined using the methods published by the auditing tax authority itself. Otherwise the tax authorities would be going against the estoppel doctrine and undermining the legitimate expectations of citizens.

Transfer and stamp duty

Valuation of real estate by the tax authorities may not consist of multiplying the cadastral value by a multiplier

Supreme Court judgments of September 15 and 23, and June 5, 2018

In our tax alert (Alerta Tributario 11 – 2018) we discussed that  the Supreme Court had concluded, in a judgment rendered on May 23, that valuations of real estate by the authorities for transfer and stamp duty purposes (and for any other tax determined by reference to “actual value”) cannot be done by multiplying the cadastral value by indexes or multipliers. This, overly general, method is only valid if the tax authorities supplement their valuation with an individual audit of the real estate concerned.

This same interpretation was reiterated in another judgment rendered on the same date and two new judgments rendered on June 5.

Capital duty

Tax may not be refunded after “change of mind ” over resolved dissolution

Madrid High Court. Judgment of February 12, 2018

It was resolved to liquidate and dissolve a company and capital duty was paid. The resolution was reversed, however, in a late decision, and a refund application was filed for the tax paid. Madrid High Court denied the refund because after a dissolution with liquidation has been formalized, all the associated rights take effect.

Administrative procedure

Screenshots of the electronic notice are allowable as evidence of the notice date

National Appellate Court. Judgment of April 19, 2018

Notice of an administrative act was sent by post and electronically. The notice date appearing on the Spanish Tax Agency's website was the date of the electronic notice, which fell after the date of the notice sent by post. Accordingly, the taxpayer used the electronic notice date as the beginning of the period for appealing, and took the precaution of taking a screenshot of the information on time periods appearing on the website.

The appeal was not accepted due to being outside the time limit which the tax authorities construed should have run from the date of the first notice (sent by post). The taxpayer advised the authorities that when the non-admission notices were received the notice date of the appealed acts on the Agency’s website had been changed, and the date that appeared as such was the date of the notice sent by post. Once again, the taxable person took a screenshot of the information on the website.

The National Appellate Court accepted the taxpayer’s arguments, basically because the electronic notice is mandatory for the tax authorities and because if there has been an error in the calculation of time periods it was caused by incorrect information on the Agency's website (after accepting the taxable person's screenshots as evidence).

Tax procedure

Tax paid to avoid criminal liability may not be refunded

Supreme Court. Judgment of May 29, 2018

A ground for acquittal in relation to a statute-barred year may be obtained if an adjustment is filed and paid over without a prior request from the tax authorities. In other words, if the tax is paid over when the tax authorities are no longer entitled to make an assessment.

The Supreme Court concluded that in these cases, even if a tax that is statute-barred has been paid over, it may not be refunded, in that it was paid for the purpose of avoiding criminal liability in relation to a potential crime against public finance.  

Review procedure

Unconstitutional local taxes may be challenged directly in an application for judicial review

Supreme Court. Judgment of May 21, 2018

As we discussed in our tax alert (Alerta Tributario 10-2018), the Supreme Court concluded in this judgment that where it is only the unconstitutional nature of rules on the application of taxes and other public law revenues of local government entities that is being contested, there is no obligation to lodge an appeal with the administrative tribunals as a prior requirement for an application for judicial review.

The Supreme Court affirmed that a decision on these types of matters falls outside the jurisdiction of local government entities, and it would therefore be senseless and disproportionate to make taxpayers take this step before initiating a judicial proceeding.

Review procedure

Defects in decision to file application for judicial review may be remedied

Supreme Court. Judgment of May 7, 2018

For a legal entity to file an application for judicial review the competent body at the legal entity must adopt a resolution to this effect. That resolution must be produced when the application is filed.

The Supreme Court concluded that if that resolution is not produced when the application is filed, the court must give the person the chance to remedy that defect, because otherwise due process rights could be denied to them.

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