Tax Newsletter - January 2023

Spain - 

AEAT and provincial tax authorities for Basque Country and Navarra bound by valuation adjustments made and also have to give notification to each other by initiative

The valuation adjustments made to a taxpayer for corporate income tax purposes have to be notified to other authorities in Spain, so that they can make the corresponding adjustments to any of their taxpayers affected by those adjustments. According to the Supreme Court:, this obligation is regardless of whether the adjustments have been documented in reports signed in agreement. 

Supreme Court changes principle and rules that late-payment interest paid by tax authorities is taxed in general component of taxable income

Taking the opposite view to its conclusion in a judgment delivered on December 3, 2020, the Supreme Court has now concluded that the late-payment interest arising from refunds of taxes paid incorrectly are capital gains subject to and not exempt from personal income tax. Moreover, because they do not arise from transfers, they have to be included in the general component of taxable income rather than in the savings component.

Keeping same pay when joining the board of directors may be indication that director has employment relationship and another contract for services

The National Appellate Court has accepted deduction of a director’s compensation, even though it was not strictly in compliance with commercial law on compensation of this type, because the company provided proof that the director had a contract for services and another employment relationship (coexisting contractual relationships theory) as opposed to exclusively a contract for services (overriding contractual relationship theory). Among other factors, the court held that an indication of these two coexisting relationships is that the compensation did not change materially when the worker joined the managing body.

Passport does not substantiate buyer’s principal residence regarding exemption for export of goods under travelers’ scheme, if it does not contain information on address

The Supreme Court has held that, to apply the exemption for exports under the travelers’ scheme, the documents produced by the traveler must substantiate their residence. Therefore, a passport that does not contain the traveler’s address is not a valid document.

Refunds arising from mutual agreement procedures cannot be classified as refunds of tax paid incorrectly

According to TEAC, refunds arising from mutual agreement procedures cannot be classified as refunds of tax paid incorrectly, because they do not arise from incorrect application of the legislation, but rather from the competent authorities’ efforts in relation to avoiding double taxation. It recalled, moreover, that no late-payment interest can accrue while mutual agreement procedures that began before February 6, 2020 are in progress.

Exemption from the tax on economic activities may have retroactive effects, even if notified outside time limit

The legislation on the tax on economic activities provides that cancellations of registration filed outside the time limit have retroactive effects on the effective date for cessation of the activities. The Balearic Islands High Court has extended this effect to apply to notifications filed outside the time limit of the right to apply exemptions.

Amounts received by heirs of laid off employee are taxable for inheritance and gift tax purposes and not subject to withholdings

The DGT has concluded that the amounts remaining to be paid on the death of an employee, under an agreement reached in a collective layoff procedure, are subject to inheritance and gift tax for the heirs not to personal income tax for the deceased employee.


For further details on this month’s judgments, decisions, resolutions and legislation, SEE THE WHOLE NEWSLETTER HERE.