Tax Newsletter
July 24
Case law:
Value Added Tax (VAT)
Value Added Tax (VAT)
- Ruling of the CJEU of 11 July 2024. VAT. Taxable Event. Expropriation.
- The CJEU has heard Case C-182/23 concerning a request for interpretation of EU law made by the Supreme Administrative Court of Poland. Specifically, the CJEU must decide whether the VAT Directive allows a farmer to be considered a taxpayer when he transfers ownership of a plot to the Public Treasury by way of expropriation in exchange for compensation, due to being used for non-agricultural purposes.
- The Court of Justice declares that, in the case analysed, the compensation received as a result of the confiscation is directly related to the transfer of ownership of the agricultural land to the Polish Public Treasury. In this regard, the person subject to expropriation (who is the person liable to VAT on account of his agricultural activity) acted as a taxable person when transferring ownership of the aforementioned plots related to his economic activity, even if he had not engaged in any real estate marketing activity and did not carry out any procedures for the purposes of the transfer.
- Supreme Court ruling of 27 June 2024. VAT. Exemption.
- The Supreme Court resolves the appeal for cassation filed against the ruling by the High Court of the Valencian Community regarding the settlement agreement issued by the AEAT Inspectorate for VAT and CT from 2013 to 2017. In this case, the Court must determine whether the exemption regulated in Article 20. One 12 LIVA (VAT Act) applies to the services provided by the Official Association of Pharmacists of Alicante, recorded as "income from billing services", for the intermediation activities involved in the payment of the Valencian Health Agency to pharmacies.
- The High Court rejects the appeal for cassation and states that the exemption regulated in Article 20. One 12 LIVA does not apply to the service of billing a public health service, relating to the services provided by the pharmacy offices to recipients of Social Security, provided by a professional association to certain members, who are obliged to pay a variable fee to cover the cost of said services. The reason why the Supreme Court regards this activity as not exempt is based on the fact that the satisfaction of the general interest sought in establishing the exemption examined does not correspond to the activities subject to dispute, since these activities are solely intended to satisfy the specific interests of some, not all, of the members of the pharmacy offices. The variable remuneration paid by the members means that the activities cease to be considered gratuitous and makes them onerous, and therefore subject to and not exempt from VAT.
- Ruling of Spain’s National Court of 12 June 2024.VAT. Deductibility.
- The National Court addresses the administrative appeal that seeks to contest the settlement agreement and resolution agreement of the infringement procedure for the payment of VAT, monthly periods between June 2011 and December 2012. In this regard, the question raised consists of determining whether the VAT amounts borne by the taxpayer are deductible or not as a result of invoices issued in 2011 and 2012 for obtaining advertising contracts. The adjustment carried out by the inspection body resulted in denying the deductibility of certain services invoiced by the taxpayer, since the existence of said activity was not deemed to have been proven.
- The Chamber of the National Court granted the appeal as regards the claims relating to the sanction imposed. However, it confirmed the settlement made since, based on the documentation examined, the existence of a commission contract between the taxpayer and a third party does not prove the effective performance of the intermediation services for obtaining the advertising contracts. In this regard, the National Court indicates that the existence of the commission activity, the signing of the commission contract, or even the possibility of it being customary to pay a commission agent in the media sector to be invited to restricted tenders, as alleged by the appellant, is not in question. However, based on the evidence provided, the Administration justifiably argues that it is not proven that the fees borne and deducted by the appellant correspond to the advertising services provided, since such intermediation was carried out by a natural person who at that time was not professionally linked to the company.
- Supreme Court ruling of 7 June 2024.CT. Principle of comprehensive adjustment.
- The Supreme Court resolves the appeal for reversal brought against the ruling of the National Court regarding the Settlement agreement and Resolution agreement for the infringement procedure for the payment of CT in FY 2008. The Court must determine whether the application of the principle of full adjustment may involve the rectification of settlements from statute-barred years for the benefit of the taxpayer. In particular, if non-statute-barred years are adjusted by eliminating the deduction of negative taxable bases should involve correcting the taxation of the income linked to these expenses, even if it was done in years with respect to which the limitation period had elapsed.
- The Supreme Court upholds the appeal and states that, in tax adjustment cases, the Administration must take into account all the consequences that, being decisive for the proper fulfilment of the tax obligation, derive from its powers and functions of verification and investigation involving time-barred tax years, whether they are favourable or not to the taxpayer. Specifically, if the tax adjustment affects the amount of negative taxable bases, as a result of projecting onto a non-time-barred tax year the assessment that a certain deduction was improperly applied in a time-barred fiscal year, the Administration must project, onto the adjusted tax year, the consequences arising from the absence of income that may have been improperly recorded in those same time-barred tax years, provided that the deductions are linked to such income, as required by the principle of full adjustment.
- National Court ruling of 24 April 2024. CT. Taxable income. Depreciation.
- The Supreme Court has heard an administrative appeal involving the agreement to settle corporate tax (CT) for FY 2011 to 2014. In this regard, the Inspection noted discrepancies between the amounts in the Daily Book and the Repayment File, and made an adjustment that resulted in an increase in the taxable base of the corresponding tax with the sum of the amounts of the unjustified expenses. However, the appellant argues that the Inspection should reverse at least part of the positive adjustment due to the applicability of a time limitation, consisting of a deduction of the gross tax base of 70% with respect to the accounting amortisation of tangible, intangible and real estate investments in FY 2013 and 2014.
- The Chamber of the National Court agrees to partially uphold the appeal, as it considers that there is no doubt that if the amount amortised by the taxpayer is less than that declared and the Administration has so adjusted it, then the positive adjustment made by the 30% limit on amortisation must necessarily be lower. The need to make such an adjustment in favour of the taxpayer was easily detectable by the actuary, as it was clearly inferred from the declaration subject to adjustment. In short, the Chamber understands that the action taken is not in accordance with the principle of full adjustment and proper Administration. In relation to the above, the National Court recalls that the Administration must take diligent action in order to determine the amount of the adjustment and, if evidence is lacking, choose a solution that is proportional to the adjustment in question.
- Supreme Court ruling of 6 June 2024. PIT. Income from capital gains. Self-employed professional athletes.
- The Supreme Court learned of the appeal brought by the General State Administration in connection with the PIT Settlement agreement for FY 2007 to 2010. The purpose of the appeal is to determine whether, in order for the income obtained by professional athletes for the transfer of image rights to be classified as income from economic activities in Personal Income Tax, this transfer must require the athletes to engage in an activity that is different from the sport activity.
- The High Court rejects the appeal filed, as it is of the opinion that the image rights of a professional athlete constitute, or may constitute, a source of income outside the scope of the sports activity carried out. Thus, the income derived from the transfer of image rights can be classified as income from capital gains or from economic activity; in any case and in any circumstances, the income obtained by professional athletes for the transfer of image rights must not be classified as income from economic activities in the Personal Income Tax.
- Supreme Court ruling of 24 June 2024. IGT. Inheritance.
- The Supreme Court resolves the appeal regarding the Settlement agreement for payment of the IGT. In this case, the Court must determine whether the reduction of the IGT due to kinship is fully or partially applicable in cases of consolidation of ownership in which the taxpayer failed to self-assess the inheritance tax for the estate that was partitioned, causing the right to assess the inheritance tax debt to lapse due to the statute of limitations.
- The High Court grants the appeal and establishes as legal precedent that, when the Administration's right to assess the inheritance tax on the estate that was partitioned is time-barred, the remaining portion of the kinship reduction may be applied upon consolidation of ownership. The foregoing is applicable even though, at the time, no reduction was applied upon the acquisition of the bare ownership, since the taxpayer failed to self-assess the inheritance tax for the estate that gave rise to said partition of ownership.