Tax Newsletter

Value-Added Tax (VAT)

• Ruling of the Court of Justice of the European Union of 7 April 2022. Case C-333/20. VAT. Supply of services. Permanent establishment. Human and technical resources. Marketing, organisation, advertising and representation services.
  • A German company markets pharmaceutical products in Romania through a company established in Romania. The two companies enter into an agreement for marketing, organisation, advertising and representation services, whereunder the Romanian company would actively promote the German company's products in Romania, especially through marketing activities, in accordance with the strategies and budgets established and developed by the German company.
  • The CJEU finds that Article 44 of the VAT Directive must be interpreted as meaning that a company which has its registered office in one Member State does not have a fixed establishment in another Member State on the ground that that company owns a subsidiary there that makes available to it human and technical resources under contracts by means of which that subsidiary provides, exclusively to it, marketing, regulatory, advertising and representation services that are capable of having a direct influence on the volume of its sales.

Corporate Income Tax (IS)

• Central Economic-Administrative Court (TEAC) Resolution of 25 February 2022. Corporate Tax. Whether or not there is an order of priority for the application of double taxation deductions.
  • The question raised in this economic-administrative complaint revolves around whether or not there is an order of priority for the application of double taxation deductions. The Administration holds that the deductions generated in the financial year must be taken first, while the taxpayer argues that there is no such order of priority.
  • The TEAC reiterates its opinion and determines that the deductions for international double taxation in Article 31 are not tax incentives but rather a remedy for double taxation situations that occur when Corporate Income Tax is levied in Spain on income earned abroad that has already been taxed in the country of origin. If there are deductions for the current tax year as well as others from prior tax years, the deduction for the current year must necessarily be taken first, since that is the way this tax concept is configured. If the taxes paid abroad are higher than the international double taxation deduction (what is paid on the income in Spain), the excess is a deductible expense for the year; an expense “for that year".

Inheritance and gift tax (ISD)

• Binding Query V0382-22 of 28 February 2022. Inheritance and Gift Tax. A resident of Andalusia receives a donation from her father consisting of a property located in France. Competent administration. Applicable law.
  • The petitioner, a French national residing in Andalusia, is going to receive from her father, a resident of France, the bare ownership of a property located in France. She asks which Administration has jurisdiction and what kind of tax relief is available.
  • In their response to the query, the Tax Directorate (DGT) indicates that the applicable law is Law 29/1987, of 18 December 1987, on Inheritance and Gift Tax (LISD). However, the taxpayer may opt for the application of the Inheritance and Gift Tax regulations approved by the Autonomous Community where she resides, in this case Andalusia. Secondly, since the property is not located in Spain there is no point of connection with any Autonomous Community. Therefore, the competent body for levying the tax is the Non-Resident Inheritance Tax Department of the National Tax Management Office. Finally, if the inheritance is also taxed in France, the petitioner can deduct the lesser of the following two amounts in Spain: the amount actually paid in France on the donation or the amount obtained by applying the average effective rate of the Spanish Inheritance and Gift Tax to the value of the bare ownership of the property.
• Binding Query V0242-22 of 11 February 2022. Inheritance and Gift Tax. Valuation of the pre-existing assets of a non-resident who inherits from a relative in Spain.
  • The petitioner, a tax resident in Malaysia, is the sole heir of his sister who resides in the Valencian Community. The petitioner's only asset in Spain is a savings account with a bank. He is enquiring about the valuation of the pre-existing assets for the settlement of the Inheritance and Gift Tax on the assets received following the death of his sister.
  • The taxpayer will be obligated to pay Inheritance and Gift Tax on the "mortis causa” acquisition of the assets as a consequence of his sister’s death. The taxpayer must submit a self-assessment and pay the tax to the National Tax Management Office. The taxpayer is entitled to avail himself of the rules in the Valencian Community as the Autonomous Community where the deceased resided. However, if he chooses to do so, all regulations approved by that Autonomous Community will apply. As far as the valuation of the pre-existing assets, only the assets and rights of the petitioner which were located in, or which could be or must be exercised in Spain, are considered. According to the information provided in the query, the only asset is a savings account in the petitioner’s name with a bank in Spain.

Non-Resident Income Tax (IRNR)

• Ruling of the Supreme Court of 4 March 2022. Cassation Appeal 2946/2020. Non-Resident Income Tax. Withholding on lottery winnings. Refund under the rules of each tax. Article 29.1 LJCA (Law on Contentious-Administrative Jurisdiction).
  • The Supreme Court finds that in accordance with the double taxation treaty signed by Spain and France, the requested refunds of Non-Resident Income Tax paid by reason of improper tax withholdings on certain lottery winnings constitute refunds derived from the regulations governing each tax. The Administration's failure to respond thus creates a credit right in the taxpayer’s favour. The Supreme Court also confirms that if the Administration does not issue the refunds within six-months, the taxpayer may claim a refund. Three months after filing a request for a refund, the taxpayer may resort to contentious-administrative proceedings, as provided for in Article 29(1) LJCA.

Other rulings

• Ruling of the Supreme Court of 7 April 2022. Cassation Appeal 7149/2020. General Tax Law. Request for correction of self-assessment. Violation of EU law.
  • The Supreme Court reiterates that the request to modify a self-assessment - and the resulting refund of overpaid tax - is an appropriate channel for a taxpayer to question a self-assessment when that taxpayer believes that the taxes paid under the self-assessment were wrongfully collected because such collection was contrary to the Constitution or European Union law.
• Central Economic-Administrative Court (TEAC) Resolution of 25 February 2022. Corporate Tax. Whether or not there is an order of priority for the application of double taxation deductions.
  • The question raised in this economic-administrative complaint revolves around whether or not there is an order of priority for the application of double taxation deductions. The Administration holds that the deductions generated in the financial year must be taken first, while the taxpayer argues that there is no such order of priority.
  • The TEAC reiterates its opinion and determines that the deductions for international double taxation in Article 31 are not tax incentives but rather a remedy for double taxation situations that occur when Corporate Income Tax is levied in Spain on income earned abroad that has already been taxed in the country of origin. If there are deductions for the current tax year as well as others from prior tax years, the deduction for the current year must necessarily be taken first, since that is the way this tax concept is configured. If the taxes paid abroad are higher than the international double taxation deduction (what is paid on the income in Spain), the excess is a deductible expense for the year; an expense “for that year".
• Binding Query V0382-22 of 28 February 2022. Inheritance and Gift Tax. A resident of Andalusia receives a donation from her father consisting of a property located in France. Competent administration. Applicable law.
  • The petitioner, a French national residing in Andalusia, is going to receive from her father, a resident of France, the bare ownership of a property located in France. She asks which Administration has jurisdiction and what kind of tax relief is available.
  • In their response to the query, the Tax Directorate (DGT) indicates that the applicable law is Law 29/1987, of 18 December 1987, on Inheritance and Gift Tax (LISD). However, the taxpayer may opt for the application of the Inheritance and Gift Tax regulations approved by the Autonomous Community where she resides, in this case Andalusia. Secondly, since the property is not located in Spain there is no point of connection with any Autonomous Community. Therefore, the competent body for levying the tax is the Non-Resident Inheritance Tax Department of the National Tax Management Office. Finally, if the inheritance is also taxed in France, the petitioner can deduct the lesser of the following two amounts in Spain: the amount actually paid in France on the donation or the amount obtained by applying the average effective rate of the Spanish Inheritance and Gift Tax to the value of the bare ownership of the property.
• Binding Query V0242-22 of 11 February 2022. Inheritance and Gift Tax. Valuation of the pre-existing assets of a non-resident who inherits from a relative in Spain.
  • The petitioner, a tax resident in Malaysia, is the sole heir of his sister who resides in the Valencian Community. The petitioner's only asset in Spain is a savings account with a bank. He is enquiring about the valuation of the pre-existing assets for the settlement of the Inheritance and Gift Tax on the assets received following the death of his sister.
  • The taxpayer will be obligated to pay Inheritance and Gift Tax on the "mortis causa” acquisition of the assets as a consequence of his sister’s death. The taxpayer must submit a self-assessment and pay the tax to the National Tax Management Office. The taxpayer is entitled to avail himself of the rules in the Valencian Community as the Autonomous Community where the deceased resided. However, if he chooses to do so, all regulations approved by that Autonomous Community will apply. As far as the valuation of the pre-existing assets, only the assets and rights of the petitioner which were located in, or which could be or must be exercised in Spain, are considered. According to the information provided in the query, the only asset is a savings account in the petitioner’s name with a bank in Spain.
• Ruling of the Supreme Court of 4 March 2022. Cassation Appeal 2946/2020. Non-Resident Income Tax. Withholding on lottery winnings. Refund under the rules of each tax. Article 29.1 LJCA (Law on Contentious-Administrative Jurisdiction).
  • The Supreme Court finds that in accordance with the double taxation treaty signed by Spain and France, the requested refunds of Non-Resident Income Tax paid by reason of improper tax withholdings on certain lottery winnings constitute refunds derived from the regulations governing each tax. The Administration's failure to respond thus creates a credit right in the taxpayer’s favour. The Supreme Court also confirms that if the Administration does not issue the refunds within six-months, the taxpayer may claim a refund. Three months after filing a request for a refund, the taxpayer may resort to contentious-administrative proceedings, as provided for in Article 29(1) LJCA.