The General Taxation Law makes a clear distinction between “tax management procedures” and “inspection activities and proceedings”, regulating them in two different chapters (chapters III and IV, respectively) of Title III of “tax application” and conferring different functions and powers to each of these procedures.
Among others, management procedures include “limited reviews” which enable the tax authorities to verify the facts, acts, elements, activities, operations and other circumstances that determine the tax obligation, but only allowing them to (i) issue official demands to third parties, (ii) examining the data specified by taxpayers in their tax returns, (iii) examine the data and background facts known by the tax authorities that reveal the performance of the taxable event or the existence of elements of the tax obligation not reported or different from those reported; and (iv) review records and documents required by the tax provisions and other books, records or documents, including invoices and other supporting documents. However, the Law expressly prevents the review of the corporate accounting records in this type of procedure.
Therefore, any limited review carried out that goes beyond this expressly defined scope will be null and void. In this bulletin, we discuss precisely a decision by the Central Economic-Administrative Tribunal, of May 13, 2014, which overturned an assessment resulting from a limited review because conclusions were reached in it that require examining and evaluating accounting information.
Specifically, the tax authorities had considered that the exception to the exemption of article 108 of the Securities Market Law applied in a transfer of securities, while the Central Economic-Administrative Tribunal considered that this conclusion could not be reached in a limited review because it requires reviewing accounting information or documentation, for example, to determine what assets are included in the company’s assets, what their actual value is and what proportion they represent of the company’s total assets.
1. Corporate income tax.- Proof of the correlation of expenses and income (Cataluña High Court. Judgment of January 9, 2014)
2. Inheritance and gift tax.- Presumption of proportional division of the estate does not apply where the decedent has decided on the division (Madrid High Court. Judgment of February 7, 2014)
3. Inheritance and gift tax.- Nephew by marriage, collateral relative by affinity, is entitled to apply the group III reduction for collateral relatives up to the third degree (Canary Islands High Court. Judgment of January 23, 2014)
4. Tax on retail sales of certain oil and gas products (“health cent”).- Different Spanish court judgments relating to applications for refunds of amounts incorrectly paid over (National Appellate Court, Central Economic-Administrative Tribunal and High Courts)
5. Administrative proceeding.- Notification by public notice due to death of the entity’s representative is not valid when only one attempt at notification has been made (National Appellate Court. Judgment of March 6, 2014)
6. Inspection proceeding.- The inspectors do not have unlimited power of characterization (National Appellate Court. Judgment of March 6, 2014)
7. Judicial review proceeding.- There is no time limit for appealing against unfavorable decisions by administrative silence (Constitutional Court. Judgment 52/2014, of April 10, 2014)
II. Decisions and rulings
1. Corporate income tax.- Correction of double taxation of dividends (Directorate-General of Taxes. Ruling V1043-14, of April 14, 2014)
2. Corporate income tax.- Treatment of minimum dividends for the purposes of the restriction on finance costs (Directorate-General of Taxes. Ruling V0991-14, of April 7, 2014)
3. Personal income tax.- A legal owner cannot claim the tax credit for reinvestment in a principal residence unless the legal ownership is the result of the death of either spouse and the residence continues to be the principal residence (Central Economic-Administrative Tribunal. Decision of May 8, 2014)
4. Personal income tax.- Personal and family allowance. It is possible to waive the right to file a tax return where there is no obligation to file (Central Economic-Administrative Tribunal. Decision of May 8 , 2014)
5. Nonresident income tax.- Classification of engineering designs and studies under the Spain-Morocco tax treaty (Directorate-General of Taxes. Ruling V0979-14, of April 7, 2014)
6. Procedure for obtaining a refund.- Late-payment interest accrues until payment is ordered rather than until payment is actually made (Central Economic-Administrative Tribunal. Decision of April 24, 2014)
7. Collection procedure.- The entity receiving an order of attachment of claims (present or future) in connection with a creditor must comply with the order and is not entitled to appeal it (Central Economic-Administrative Tribunal. Decision of April 28, 2014)
8. Management / inspection proceeding.- It is not possible for the tax authorities to check compliance with the anti-avoidance rule of article 108 of the Securities Market Law in a limited review proceeding (Central Administrative-Economic Tribunal. Decision of May 13, 2014)
9. Inspection proceeding.- Inspection proceedings performed by inspectors without jurisdiction by reason of territory are void (Central Economic-Administrative Tribunal. Two decisions of April 30, 2014)
1. Exchange of information with financial institutions. Rules on notices
2. Corporate income tax and nonresident income tax forms
3. Voluntary payment period for the national and provincial portions of the 2014 tax on economic activities