Nonresident income tax.- If dividends are paid to a holding company resident in a member state, but the beneficial owner is not resident in the EU, they are subject to withholding tax
Central Economic-Administrative Tribunal. Decision of October 8, 2019
A Spanish company withheld nonresident income tax from dividends paid to its parent company (resident in Luxembourg), at the rate provided in the Spain-Luxembourg tax treaty (15%). Later, the parent company filed a Form 210 to request a refund of all the tax that had been withheld. The parent company argued that it was eligible for the exemption allowed for income distributed by subsidiaries resident in Spain to their parent companies resident in other EU member states (article 14.1 h) of the Nonresident Income Tax Law).
In an audit commenced after that request, the exemption was denied and it was also concluded that the withholding rate under Spanish domestic law was applicable (21% in the periods at issue) rather than the rate under the tax treaty.
In a decision delivered on October 8, 2019, published in June 2020, TEAC followed the interpretation determined by the CJEU in a judgment delivered on February 26, 2019 (C-116/16 and C-117/16, T Danmark) and concluded that in the examined case the “antiabuse clause” allowed in the law governing the exemption was applicable.
TEAC underlined the following points in this case:
a) The Luxembourg parent company is wholly owned by a Qatar company and was set up, the auditors’ had concluded, to claim the exemption incorrectly.
b) The beneficial owner of the dividends is not the Luxembourg company, instead its Qatar parent.
Among the reasons enabling it to conclude as to the beneficial owner of the dividends, it underlined the importance of a financial and cash flow analysis, separately from the characterization of the payments made to the parent company as dividends or, for example, as remuneration or a refund of a portion of the funding received.
c) The fact that the Luxembourg company is not the beneficial owner of the dividends precludes both the exemption and the reduced rate under the tax treaty with Luxembourg.
TEAC denied the exemption on the basis that, if it had not interposed a company in an EU member state, the Qatar company would have been subject to withholding tax at source under Spanish domestic law.
Collection procedure.- New wording of article 150.7 of General Taxation Law (LGT) on calculation of late-payment interest on assessments issued for enforcement is applicable where receipt of the enforcement case file occurs on or after October 12, 2015
Before the reform of article 150.7 of the General Taxation Law (LGT) made by Law 34/2015 of September 21, 2015, it had been determined in tax commentary and analysis and in the case law that in scenarios involving new assessments issued to enforce others that had been voided for procedural reasons, late-payment interest did not have to be calculated beyond the date that first voided assessment was issued. In other words, when calculating the late-payment interest due in respect of the second assessment the date when the first assessment was issued had to be taken as the end date of the period.
Following that reform, however, late-payment interest in respect of new assessments issued for enforcement has to be calculated between the date that would have been associated with the voided assessment and the point when the new assessment is issued.
In this special appeal for a ruling on a point of law, at issue was determining whether the late-payment interest that is calculated in cases where a new administrative assessment is issued as a result of a judgment or decision ordering a rollback of procedure (to an earlier moment in time) under article 150.7 of the General Taxation Law is subject to the amendment made by Law 34/2015 of September 21, 2015, regardless of the date when the resumed procedure was initiated.
TEAC concluded that the new wording of article 150.7 of the General Taxation Law is applicable, as specified in paragraph 6 of transitional provision one of Law 34/2015, of September 21, 2015, to audit work in which the receipt of the case file by the body responsible for enforcing the decision as a result of the ordered rollback of procedure occurs on or after October 12, 2015, regardless of whether the audit that resumed after the rollback had started before that date.
Collection procedure.- Late filing surcharges are not applicable to adjustments made in one period as a result of an earlier administrative review
Madrid Regional Economic-Administrative Tribunal. Decision of November 27, 2019
Article 27 of the General Taxation Law contains a surcharge regime for the late filing of self-assessment returns without a prior request from the tax authorities. That article clarifies that a prior request from the tax authorities means any administrative procedure conducted with the taxpayer’s formal knowledge which results in the recognition, adjustment, confirmation, audit, or securing of the tax debt.
In the facts examined in this claim, the company filed an additional corporate income tax return for fiscal year 2104 outside the time limit as a result of an earlier audit relating to fiscal year 2011, in which the company had been instructed to make adjustments in respect of later years.
The tax authorities considered that that late filing was voluntary, without a prior request, and therefore issued a late-filing surcharge. Madrid TEAR, however, concluded, on the basis of national appellate court judgment of March 30, 2011, that that late filing arose as a result of an earlier administrative procedure and that, therefore, the spontaneity factor required to assess that surcharge was not present.