Tax Newsletter

Regulations

• Law 5/2022, of 9 March, amending Corporate Income Tax Law 27/2014, of 27 November, and the consolidated text of the Non-Resident Income Tax Law approved by Royal Legislative Decree 5/2004, of 5 March, in relation to hybrid asymmetries.

Value-Added Tax (VAT)

• Ruling of the Court of Justice of the European Union of 24 February 2022. Cases C-52/21 and C-53/21. VAT. Freedom to provide services. Principle of proportionality. Obligation to prepare and submit justifying documentation.
  • In its decision, the CJEU finds in response to the question referred for a preliminary ruling that article 56 TFEU must be interpreted as precluding legislation of a Member State which requires any company established in the territory of that Member State to submit to the Tax Authorities statements relating to payments made as remuneration for services contracted out to providers established in another Member State, in which the latter are subject to the rules on company accounts and to the obligation to issue invoices in accordance with VAT rules, under penalty of an increase in corporate tax equal to 50% or 100% of the value of those services, where, in accordance with administrative practice, the first Member State imposes no equivalent obligation if those services are provided by suppliers established in its territory.
• TEAC Resolution of 22 February 2022. VAT. Vehicles transferred by a business owner or professional to its employees. Applicability of VAT. Supplies of services for consideration. Change of criterion.
  • The TEAC modifies its previous criterion to adapt it to Community case law and establishes that, in order to consider the transfer of vehicles by a business owner or professional to his employees as a supply of services for consideration, the general standards established for this purpose by the Court of Justice of the European Union (CJEU) apply.

    Accordingly, such transactions are only classified as transactions for consideration if there is a direct link between the provision of the service by the employer and the consideration received in return. Furthermore, the consideration must have a subjective value, i.e. a value that can be expressed in monetary terms. Goods or services provided by an employer to his employees cannot be regarded as a transaction for consideration merely because such a transaction is regarded as in kind compensation for income tax purposes (CJEU 20 January 2021, Case C-288/19).

Personal Income Tax (IRPF)

• TEAC Resolution of 21 December 2021. Personal Income Tax. Exemption for work performed abroad. Article 7.p) Personal Income Tax Law (LIRPF). Requirements.
  • The TEAC does not agree with the first argument put forward by the Tax Inspectorate insofar as the contested agreement establishes as a legal requirement in order to benefit from the exemption that the work being performed abroad is due to the fact that the Spanish company that is paying from Spain is the one that has “moved" the worker abroad. As the claimant maintains, there is no legal basis for the requirement imposed by the Inspectorate that the recipient must travel abroad at the expense of the employer. Therefore, for the purposes of the exemption at issue here, it is irrelevant whether the taxpayer's travel abroad was “on behalf of” the resident taxpayer, since this is not a requirement imposed by tax law in order to benefit from that exemption. Rather, the exemption applies to “employment income earned for work actually performed abroad”.
• TEAC Resolution of 4 March 2022. Personal Income Tax. Correction of self-assessment of unjustified capital gains due to the holding, declaration or acquisition of assets or rights in respect of which Form 720 was not timely filed. Application of the CJEU ruling of 27 January 2022, Case Commission/Spain C-788/19.
  • Based on the ruling of the CJEU of 27 January 2022, Commission/Spain Case C-788/19, the TEAC finds that the obligation for residents in Spain to provide information on the assets they own in foreign countries is consistent with Community regulations, which makes up for the more limited information available on such assets compared to the information that is available on assets located in Spain. Likewise, the consideration as unjustified capital gains established in Article 39.2 of the Personal Income Tax Law (LIRPF) (on holding, reporting or acquiring assets or rights in respect of which the aforementioned reporting obligation was not fulfilled in a timely manner) is consistent with Community law, as it is based on a prior non-compliance and allows for proof to the contrary. On the other hand, the practical impossibility of this component of the tax base being covered by the statute of limitations is inconsistent with the freedom of movement of capital.
  • Likewise, the TEAC has found that the unjustified capital gains in Article 39.2 LIRPF is a species within the genus of unjustified capital gains, and therefore subject to the rules of evidence, and the interpretation of them in case law. The taxpayer is the one who must prove their emergence in the time-barred financial year.

• Binding Query V0111-22 of 24 January 2022. Personal Income Tax. Exemption for work performed abroad. Days worked. Computation.
  • The taxpayer asks whether, for the purposes of applying the exemption regulated in article 7 p) LIRPF, it must calculate the total number of days during which its workers are posted abroad to set up the welding lines or only the days actually worked at the customers’ factories abroad, deducting the weekends off from the time spent by the workers abroad.
  • Regarding the question about weekends, the DGT issued a response to query V2196-14 in relation to workers posted abroad for a few days, weeks or even several months, indicating that the calculation includes the number of calendar days that the worker is actually posted abroad for work-related reasons, i.e., even non-working days (in this case, public holidays or weekends which they may actually spend there once the actual provision of the work has begun). On the other hand, public holidays or weekends that the worker spends abroad for special reasons before the work begins or after it is finished do not count. It should also be noted that according to the ruling of the Supreme Court of 25 February 2021 (appeal no. 1990/2019), travel days also count.

Corporate Income Tax (IS)

• TEAC Resolution of 25 February 2022. Corporate Tax. Tax loss carryforwards. Possibility of applying the mechanism for offsetting tax losses when the self-assessment is filed late. Change of criterion.
  • With regard to offsetting tax loss carryforwards when the self-assessment is not timely filed, the TEAC had previously taken the position that offsetting tax losses was a tax option under article 119.3 of the General Tax Law and so the failure to timely file the Corporate Tax return for a given year in essence meant "opting" for the non-compensation of any amount in that tax period, without the possibility of subsequently changing that option by filing a late return. However, in response to the Supreme Court ruling of 30 November 2021 (appeal 4464/2020), the TEAC proceeds to correct what had heretofore been its position, assuming what the Supreme Court has established as jurisprudential doctrine: the compensation of tax losses from prior years at the time of filing Corporate Tax returns is an autonomous right, not a tax option, and as such is not subject to restrictions other than those explicitly provided for in the law. Consequently, it is not possible to prevent the exercise of this right through the presentation of an extemporaneous Corporate Tax filing.

Inheritance and gift tax

• Supreme Court Ruling of 22 February 2022. Cassation Appeal 3561/2020. Inheritance Tax. Household goods. Interpretation of concept. Reiteration of doctrine.
  • The Supreme Court refers to its ruling of 10 March 2020 (appeal 4521/2017) and reiterates that:
    1) Household goods comprise the movable assets at the service of the family home or for the personal use of the deceased, in accordance with the descriptions contained in article 1321 of the Civil Code, in relation to article 4.4 of the Estate Tax Law, both interpreted in relation to their concordant precepts according to the modern day social reality.
    2) Specifically, the idea that the three percent of the decedent’s estate, which is established as a legal assumption in article 15 of the aforementioned LISD, includes the totality of the estate’s assets rather than those which, due to their essence, value and function, are for the private or personal use of the deceased, to the exclusion of all others, is incorrect.
    3) Shares and investment units which are not included, even by analogy, in the definition of household goods no matter how broadly this term may be defined, may not be considered when applying the legal presumption of the three percent.
    4) The taxpayer may disprove such a presumption by providing legally-admitted evidence in order to demonstrate, administratively or judicially, that certain goods, as they are not part of the household goods, are not eligible for inclusion in the three percent, on the basis that such a notion only includes tangible movable property for personal or private use per the criterion that has been established. In particular, it is not necessary to prove the eligibility of the items by reason of their nature, which the Administration must exclude. In other words, no proof is required from the taxpayer in respect of money, securities, real estate or other intangible assets because they are items which would never be included in the legal definition of household goods for tax purposes, since they are unrelated to this category.