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Newsletter Tax April 24

Tax Newsletter

April 24

Daniel Tarroja, Tax Partner
03/05/2024
Newsletter Tax April 24

Case law:

Corporate Income Tax (IS)

  • Supreme Court Ruling of 22 March 2024. Corporate Income Tax (IS). Deductibility of expenses from statute-barred tax years.
    • The Supreme Court has heard an appeal for reversal of the ruling handed down by the High Court of Justice of Andalusia concerning the deductibility of expenses from statute-barred tax years. Specifically, the question to be resolved concerns whether it is appropriate to deduct for IS purposes an expense incorrectly recognised in a year subsequent to that in which it accrued, provided that the allocation of the expense in the subsequent year does not result in lower taxation than that which would have been applicable under the general rules on temporary allocation when the year in which the accrual took place is statute-barred, whereby the limitation period is calculated from the end date of the reporting period for the year in which the expense was recognised.
    • The High Court finds the appeal inadmissible and rules that, in accordance with the provisions of Article 11 of the Corporate Income Tax Act, it is permissible to deduct an expense that was incorrectly recognised in an accounting period subsequent to its accrual in accordance with the accounting regulations, provided that the allocation of the expense in the subsequent period does not result in lower taxation than that which would have been applicable under the general rules on temporary allocation, even though the period in which the expense was accrued was statute-barred.

Value Added Tax (VAT)

  • Supreme Court Ruling of 18 March 2024. Value Added Tax (VAT). Rectification of tax payments charged.
    • The Supreme Court resolves the appeal for reversal brought against the ruling of the High Court of Justice of the Balearic Islands regarding the provisional settlement agreement for the VAT tax heading for the financial year 2015, periods 1 to 12. The contested issue seeks to determine whether, in cases where a person liable to pay VAT has invoiced and self-assessed VAT by incorrectly applying a reduced tax rate and is, therefore, unable to rectify the tax liability in accordance with Article 89(3)(1) of the VAT Law, it is appropriate, under the principle of VAT neutrality, to demand an increase in the tax liability by applying the general tax rate, calculated on the same tax base used to calculate the amount with the reduced tax rate, or whether, alternatively, the tax liability calculated at the general tax rate should be deemed to be included in the total amount actually collected.
    • The High Court finds the appeal inadmissible and rules that in cases where a person liable to pay VAT has invoiced and self-assessed VAT by incorrectly applying a reduced tax rate and is, therefore, unable to rectify the tax liability in accordance with Article 89(3)(1) of the VAT Law, it is not appropriate to demand an increase in the tax liability by applying the general tax rate, calculated on the same tax base used to calculate the amount with the reduced tax rate. Instead, the tax liability calculated at the general tax rate should be deemed to be included in the total amount actually collected.
  • Supreme Court Ruling of 27 March 2024. VAT. Tax liability.
    • The Supreme Court has heard the appeal for reversal of the ruling of the High Court of Justice of La Rioja. The contested issue concerns determining, in accordance with the provisions of Article 73 of the VAT Directive on the common system of VAT and the EU case law interpreting the VAT Directive, whether subsidies granted by public bodies to finance the management of public interurban passenger transport services, in particular those granted prior to the amendment of Article 78(2)(3) of the VAT Law by Final Provision 10(2) of Law 9/2017, of 8 November, on Public Sector Contracts, are subject to VAT.

Non-Resident Income Tax (IRNR)

  • The High Court declares the appeal to be admissible and responds to the contested issue by ruling that subsidies granted by public bodies to finance the management of the public service for the purpose of covering its deficit, provided that they are subsidies or endowments, do not constitute transactions subject to VAT. Given the particular circumstances of the case, where the subsidies granted for the financing of the provision of the public service were intended to cover the tariff deficit, it shall be considered that these subsidies are not linked to the price and, therefore, are not subject to VAT.
  • Supreme Court Ruling of 4 April 2024. Non-Resident Income Tax (IRNR). Economic rights derived from the transfer of federative rights.
    • The Supreme Court hears an appeal for reversal of the ruling issued by the National High Court relating to Non-Resident Income Tax for the financial year 2014. The contested issue concerns whether the economic rights deriving from the transfer of a player's federative rights, received by a club or sports entity not residing in Spain, as a result of the transfer of such player to a club or sports entity residing in Spain, constitute a capital gain subject to IRNR.
    • The High Court declares the appeal inadmissible and responds to the contested issue by finding that the economic rights derived from the transfer of the federative rights of a player received by a club or sports entity not residing in Spain, as a result of the transfer of such player to a club or sports entity residing in Spain, constitute a capital gain subject to IRNR.

Administrative doctrine:

Value Added Tax (VAT)

  • Spanish Central Economic-Administrative Court (TEAC) Resolution of 18 March 2024. VAT. Expiry. Compensation and refund.
    • The TEAC hears the appeal lodged regarding the settlement agreement and resolution agreement of the penalty procedure implemented by the Spanish Tax Administration Agency (AEAT) for the VAT tax heading from Q1/2021 to Q4/2015. In this regard, the TEAC must determine whether the adjustment applied by the inspection is legally admissible, specifically, whether having generated an excess of deductible tax payments not offset in the 4Q/2015 tax return but having offset this excess in subsequent returns, it would be appropriate to amend this return with another subsequent return requesting a refund of the aforementioned excess.
    • The TEAC dismisses the appeal and reiterates the previously issued administrative doctrine, whereby it is established that the VAT regulations classify compensation in future tax periods and requests for refunds as alternative and exclusive ways of recovering the excess of input tax payments over accrued tax payments. This alternative constitutes an option whereby once the taxpayer has decided to choose one of the possibilities afforded by the rule, it is not possible to modify it outside the statutory deadline for filing a tax return.

Other resolutions of interest

  • TEAC Resolution of 22 February 2024. Information request. Not established.
    • The TEAC hears the appeal lodged against the request for information with tax implications from an entity not established in Spain and without any legal/tax relationship with the Spanish Tax Administration Agency that could be considered a taxable entity. In this regard, the TEAC must determine whether the request for information made to the appellant entity is in accordance with the law.
    • The TEAC upholds the appeal and reiterates its administrative doctrine, namely, that the Spanish Tax Administration Agency lacks the authority to issue an individual request for information to an entity not established in Spain that has no link or basis of connection with Spain that would determine the existence of a legal/tax relationship. Therefore, it is not subject to the Spanish domestic legal system. In these circumstances, information should be obtained through the appropriate mutual assistance instruments for the exchange of information and not through an individual request for information, as sought by the AEAT.