Publications

Corporate income tax

The limit on tax credits for events of exceptional public interest is 90% of the gifts made to the consortium over the length of the program

Central Economic-Administrative Tribunal. Decision of March 11, 2019

The base for calculating the tax credit for events of exceptional public interest is restricted to 90% of the gifts made to the consortium for the performance of programs and activities related to the event of exceptional public interest.

At issue was whether the limit had to be calculated by reference to all the gifts made to the consortium over all the years of collaboration with it or whether, by contrast, the calculation must be on an annual basis, by reference to the gifts made to the consortium every year.

According to the interpretation set by the DGT in binding ruling V0106-11 of January 21, 2011, TEAC concluded that the limit on the tax credits for events of exceptional public interest is 90% of the gifts made to the consortium over the whole length of the program.

Nonresident income tax

A nonresident income tax withholding higher than the required amount is an incorrect payment 

Central Economic-Administrative Tribunal. Decision of March 11, 2019

A nonresident income taxpayer had had a nonresident income tax withholding deducted from salary income not obtained in Spain, and therefore decided to apply for recovery of the amount in a procedure for refund of incorrect payments. The application for a refund was not accepted by the tax authorities because they considered the taxpayer had not followed the right procedure.

TEAC concluded in this decision that the withholdings deducted in respect of nonresident income tax had been incorrect. In other words:

1. If the withholding requested to be refunded by the claimant is incorrect (namely, higher than the amount that would be calculated by correctly applying the law in force when the withholdings were made), the procedure for the request is an application for incorrect payments.
2. If, however, the withholding was lawful but the person is entitled to a full or partial refund (because a lower amount of tax was due), the proper route is to file a tax return.

In the specific case raised, since the taxpayer argued that the income did not have to be taxed in Spain, the application procedure for a refund of incorrect payments should be used. TEAC therefore ordered reversion of the proceedings for the authorities to carry out the appropriate procedure to determine whether the income was indeed not subject to tax in Spain.

VAT

Royalties are part of customs value if they are related to the imported goods

Central Economic-Administrative Tribunal. Decision of February 20, 2019

A TEAC decision examined whether the customs value of imported goods includes the payment of royalties to third parties (other than the seller) while the legislation applicable until May 2016 was in force.

The tribunal concluded that royalties must be included in the customs value in cases such as that examined, in which it is observed that:

1. The royalties are related to the imported goods, due to the imported goods being the same goods that are sold and give rise to the royalty and due to bearing the trademark from their country of origin on their labels.
2. The payment of the royalties is a condition for sale of the imported goods in that the licensor exerts control over the manufacturer. For these purposes, the court specified as the main indications of control the need for the supplier and the product to be authorized first and the audits that the licensor may make at the suppliers’ factories.

Despite this, the court (applying the interpretation in the Supreme Court judgments dated June 21, 2010 and February 28, 2011) concluded that VAT on the import does not have to be charged on the royalties paid if the reverse charge mechanism has been declared, to avoid double taxation.

Administrative procedure

The decision to correct the tax domicile has effects in relation to non-statute barred tax obligations on its notification date

Central Economic-Administrative Tribunal. Decision of March 11, 2019

A taxpayer was notified of the correction by the tax authorities of its tax domicile and at issue was which tax debts were affected by that correction.

TEAC concluded that, as a general rule, a change of tax domicile will have effects for all non-statute barred substantive obligations. A decision to correct the tax domicile, however, may only be relied on as against the taxpayer from when it is notified to it, and therefore will only have legal effects for any substantive tax obligations that have not become statute-barred on the date of its notification.

The TEAC has therefore corrected the interpretation upheld in previous decisions in which it had concluded that the legal effects of a change of domicile could be relied on as against the taxpayer from the date on which it was notified of the change of domicile procedure.

Collection procedure

Tax debts cannot be offset against claims acknowledged by another authority

Central Economic-Administrative Tribunal. Decision of March 20, 2019

A taxpayer applied for the offset of a tax debt in respect of personal income tax withholdings against a subsidy granted by the Valencian autonomous community government. The Valencian TEAR held that the debt could be offset even though the subsidy was not a tax claim.

Against the decision rendered by the Valencian TEAR, AEAT filed a special appeal for a ruling on a point of law, which has been upheld by TEAC, setting the following interpretation: the offset of debts under the General Taxation Law may only be done in respect of claims acknowledged by Hacienda Pública Estatal, the central government finance authority, where the same person is creditor and debtor with respect to that finance authority.

TEAC took the view, in fact, that the offset applied for by the person with tax obligations in this case is impossible to perform because the only way in which AEAT may claim from an autonomous community or local agency the payment of a monetary sum acknowledged for a person with tax obligations is through a different mechanism to offset (i.e. attachment).

Collection procedure

Collection of a debt cannot be enforced if an application has been made for deferred or split payment of the debt without notifying dismissal of the administrative proceeding initiated with that application

Central Economic-Administrative Tribunal. Decision of February 26, 2019

A taxpayer filed an application for deferred and split payment in relation to a tax debt. In view of this, the tax authorities asked the person with tax obligations to provide certain information and documents. The taxpayer failed to comply with that request, for which reason that application for deferred and split payment was dismissed, although that dismissal was not notified to the taxpayer. Later, an interlocutory order initiating enforced collection proceedings was issued which this time was notified to the taxpayer.

TEAC overturned the interlocutory order initiating enforced collection proceedings by taking the view that, before it was issued, the taxpayer should have been notified of the decision to dismiss the application for deferred and split payment.

Economic-administrative procedure

The economic-administrative tribunals are not required to ask for the case record to be completed before declaring the debt statute-barred

Central Economic-Administrative Tribunal. Decision of March 20, 2019

A taxpayer received notification of an attachment order more than four years after receiving notification of the previous interlocutory order initiating enforced collection proceedings. For this reason, Madrid TEAR held on its own motion that the right to collect the debt had become statute-barred. In a later appeal for a ruling on a point of law, AEAT alleged that, before declaring the debt statute-barred on its own motion, the tribunal should have requested completion of the case record to allow inclusion of any items proving that steps tolling the statute of limitations period had taken place.

TEAC dismissed the appeal and concluded that the economic-administrative tribunals may on their own motion or on the motion of the interested party declare the debt statute-barred without giving the tax authorities the chance to complete the case record with any documents proving that the statute of limitations period had been tolled.

In short, any case records sent to the courts must be complete. And, if they are not complete, the economic-administrative tribunals are not required to request for their completion, unless there has been an absolute breach by the tax authorities of their obligation to send the case record.

Economic-administrative procedure

No response to a request for a refund of incorrect payments for more than four years does not make the right to the refund statute-barred

Central Economic-Administrative Tribunal. Decision of February 20, 2019

Catalonia TEAR held on its own motion that a taxpayer’s right to the refund of an incorrect payment had become statute-barred because more than four years had run since it had made its application and there was no record of any steps tolling the statute of limitations period.

Against this, TEAC concluded that the authorities’ inaction in the procedure initiated with an application for a refund of incorrect payments for a length of time longer than any of the statute of limitations periods, may not make the right exercised by the applicant become statute-barred. It referred in making its decision to a national appellate judgment dated June 22, 2015.

Therefore, TEAC partly upheld the claim and ordered reversion of the proceedings to Catalonia TEAR for it to examine the facts.