Spanish Constitutional Court publishes the judgment holding unconstitutional Royal Decree-Law 2/2016 in its entirety
Spain Tax Alert
On July 7 access was given to the complete wording of the constitutional court judgment, of July 1, 2020, holding unconstitutional, null and void Royal Decree-Law 2/2016 in its entirety due to breaching the substantive boundaries that cannot be overstepped by any legislative instrument of this type (article 86.1 of the Spanish Constitution). The request for a ruling on unconstitutionality was submitted by the Spanish National Appellate Court in an appeal for judicial review lodged by a client of Garrigues.
The Constitutional Court concluded that Royal Decree-Law 2/2016 has materially affected the essence of the duty to contribute to sustaining public expenditure enunciated in article 31.1 of the Spanish Constitution. This was because the introduced reform impacted three essential elements of the obligation to make prepayments: (i) method of calculating taxable income; (ii) the percentage applicable to that taxable income and (iii) determination of the amount of the payment. The Constitutional Court further held that both the prepayments and the main obligation are two inseparable parts of the same tax relationship, and both concur to the taxation of a sole economic capacity of the one taxpayer.
The declaration of unconstitutionality does not stop at the minimum prepayment, by extending also to paragraph 1.b) of additional provision 14 of the Corporate Income Tax Law (“CIT Law”) introduced by that Royal Decree-Law 2/2016, in relation to the percentage to be used to calculate the prepayment (increased rate where the minimum prepayment does not apply).
The Constitutional Court does not restrict the effects of its judgment beyond holding non-reviewable any cases “decided in a judgment with res judicata effect or any that were settled in the administrative jurisdiction due to not being challenged in the proper time and form”.
The judgment does not examine the effect of subsequent amendments of that additional provision 14 of the CIT Law on the scope of the declaration of unconstitutionality. The Constitutional Court does affirm however that those amendments have not had an impact on the “issue raised, because the amendments made to the prepayment regime related only to private equity entities (Law 6/2018) and to shippers (Law 8/2018)”.
The reasons that led the Constitutional Court to declare the unconstitutionality of Royal Decree-Law 2/2016 could be transferable to Royal Decree-Law 3/2016, of December 2, 2016, adopting measures in the tax field aimed at the consolidation of public finances and other urgent social measures.