Publications

Corporate income tax

Double taxation credit cannot be claimed for income received in respect of shareholder status

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

In this decision TEAC concluded that income received in respect of shareholder status (other than dividends) does not qualify for the double taxation tax credit.

The tribunal argued that the main factors differentiating income received in respect of shareholder status are the following:

• The tax law does not lay down the existence of a positive earnings figure at the company as a prior requirement for receiving it;
• It is not obtained according to the shareholder’s investment in the company's capital; and
• It is not decided by a shareholders’ meeting.

 

Inheritance tax

If a lawsuit on the nullity of a will is initiated after the filing period for the return, the tax authorities must require assessment of the tax or order suspension

Central Economic-Administrative Tribunal. Decision of June 18, 2019

After the end of the filing period for the inheritance tax return a lawsuit for nullity of the will was initiated, so the taxable persons requested suspension of the running of the periods for filing the self-assessment return for the tax.

More than four years after the end of the voluntary filing period for the return, the judgment bringing an end to the lawsuit for nullity of the will became final and brought the lawsuit for nullity of the will to an end. Then the tax authorities issued an assessment of the tax.

TEAC overturned the assessment due to being statute-barred. The tribunal held that, after the application for suspension, the tax authorities should have made a request for the return to be filed or expressly ordered suspension of the running of the period. By not doing so and not otherwise tolling the statute of limitations period, that period had run its course.

 

VAT

Payments for plane tickets by travelers that do not ultimately fly cannot be treated as compensation

TEAC. Decision of July 15, 2019

When a plane ticket is booked usually the whole price of the ticket has to be paid, which is not refunded if the person does not travel. This decision examined the VAT treatment in these cases.

In TEAC's opinion, the price retained by airline companies in these cases cannot be treated as compensation. Since the company has received the whole price of the ticket and retains it, the tribunal held that the VAT treatment must be the same as in cases where the customer does travel, that is, where the service is provided. In other words, in these cases it cannot be held that the aim of retention of the price by the company is to compensate for an actual harm. The fact of excluding the retained price from being treated as compensation makes it subject to VAT.

The Court of Justice of the European Union handed over a similar ruling in joined cases C-250/14 and C-289/14 (Air France-KLM and Hop!- Brit Air SAS).  

 

VAT

Transfer of land under development to carry out new construction work after demolishing the existing structures is not exempt

TEAC. Decision of July 15, 2019

Article 20.1.22 of the VAT Law allows a VAT exemption for second transfers of buildings.

In this decision it was examined whether that VAT exemption could be claimed for the transfer of industrial buildings, if the transferee's intention was to carry out a new development project after demolishing the existing structures.

TEAC held that, because the transferee’s real intention was to acquire the land, not the building, it does not qualify for exemption.

This criterion, however, could be altered in light of the recent decision by the Court of Justice of the European Union in case C-71/18 (Skatteministeriet and KPC Herning) in which it was affirmed that for the exemption not to be claimable it must be evidenced that the transfer of the land is so closely linked to the demolition of the building that it would be artificial to split them and that the parties’ intention alone is not enough to be decisive.

 

Tax on economic activities

No statute of limitations for right to review notified status information

Central Economic-Administrative Tribunal. Decision of June 25, 2019

TEAC specified in this decision that there is no statute of limitations for the tax authorities’ right to review the status information notified by taxpayers for the purposes of the tax on economic activities (IAE).

The tribunal clarified, however, that any alterations to that information by the tax authorities can only take effect for IAE assessments relating to periods that are not statute-barred.

 

Economic-administrative procedure

Claims raising the same issue that is to be decided in a preliminary ruling do not have to be stayed

Central Economic-Administrative Tribunal. Decisions of July 15 and March 28 2019

A taxpayer applied to TEAC to stay an economic-administrative proceeding because the Supreme Court had submitted a request for a preliminary ruling on the same matter that had been brought before the TEAC.

TEAC held that a stay could not be ordered because the legislation only allows a proceeding to be stayed if the request for a preliminary ruling was submitted by the same economic-administrative bodies.

 

Economic-administrative procedure

The tax authorities can request a stay of the decision they are appealing if they support that collection of the debt could be prevented otherwise

Central Economic-Administrative Tribunal. Decision of May 28, 2019

TEAC concluded in this decision that the authorities can request a stay of enforcement of the decision that has been challenged in an ordinary appeal, if that request is accompanied by a report supporting the existence of rational prima facie evidence that collection of the debt that could ultimately be payable would be prevented or seriously hindered if a stay is not ordered.

In the specific case raised, TEAC ordered the stay because the amount of the debt with the tax authorities was higher than the taxpayer’s net worth and the amount the taxpayer was able to pay in the short and long term.

 

Enforcement procedure

The authorities only have six months to levy a penalty where the previous penalty is invalid because of a partly void assessment

Central Economic-Administrative Tribunal. Decision of July 15, 2019

TEAC concluded, in a decision rendered on July 17, 2014, that if a penalty has been cancelled because the assessment behind it has been partly reversed (making it necessary to correct the amount for calculating the penalty), the authorities could impose a new penalty within four years.

However, TEAC has changed its view in a new decision and concluded that in these cases the authorities only have six months to impose a new penalty. Failure to comply with this time limit (running from when the decision partly upholding the assessment is entered on the register of body in changed of enforcing it) determines expiry of the right to carry out the procedure.

Lastly, TEAC recalled that in these cases there has not been a violation of the ne bis in indem principle from a procedural standpoint, because it is not necessary to commence a new penalty procedure.

 

Enforcement procedure

The stipulated time periods for enforcement of decisions upheld for procedural reasons also apply for substantive grounds

Central Economic-Administrative Tribunal. Decision of May 21, 2019

Article 150.5 of the General Taxation Law (in the wording before the amendment made by Law 34/2015) determined the period the authorities had to render a new assessment if a judicial or economic-administrative body had ordered “reversion of the audit work”. The Supreme Court clarified (among others, in a judgment rendered on March 27, 2017) that this period had to apply in cases where the audit had been found invalid for substantive reasons not just where it was invalid for procedural reasons.

With the apparent aim of preventing the time period in article 150.5 of the Law (now article 150.7) applying in cases where an assessment had been reversed for substantive reasons, the lawmaker expressly stated that this time period applied only where “procedural defects” are identified and a “reversion of audit work” have been ordered.

However, TEAC has now affirmed that, despite the amendment introduced in the Law, that time period applies in cases where a decision or judgment has upheld the case for substantive or factual reasons. TEAC considers that the doctrine set by the Supreme Court in relation to the former article 150.5 applies also to the current article 150.7.

 

Criminal tax offense

Letters of acknowledgement of payment attached to assessments related to an offense cannot be challenged in the economic-administrative jurisdiction

Central Economic-Administrative Tribunal. Decision of June 25, 2019

A  taxpayer filed an economic-administrative claim against “acts requesting payment” of an assessment related to an offense in which various customs elements were adjusted.

The General Taxation Law determines that offense-related assessments are not challengeable in the economic-administrative jurisdiction. For that reason, TEAC concluded that the documents attached to those assessments (as acknowledgments of payment) are not challengeable in the economic-administrative jurisdiction either.

TEAC affirmed that the acknowledgment of payment is simply a clerical instrument enabling payment of the debt and informing the taxpayer of the amount and payment periods, which are obligations stemming from the administrative decision containing it (the assessment). It is that assessment (not the acknowledgement of payment) that generates rights and obligations for the claimant.