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Newsletter Fiscal September 25

Tax Newsletter

September 25

Daniel Tarroja, Tax Partner
30/09/2025
Newsletter Fiscal September 25

Case law:

Value Added Tax (VAT)

  • Judgment of the Court of Justice of the European Union of 4 September 2025.VAT. Transfer pricing.
    • The European Court is hearing Case C‑726/23, concerning the preliminary ruling referred by the High Court of Bucharest, Romania. First, the CJEU must rule on the correct interpretation of the VAT Directive and clarify whether the amount invoiced by a company (parent) to a related company (operating entity), which is equal to the amount necessary to align the operating entity’s profit with the activities carried out and the risks assumed, in accordance with the OECD Transfer Pricing Guidelines’ profit-split/margin method, should be considered payment for a service and therefore fall within the scope of VAT. If the answer to this question is affirmative, the CJEU must clarify whether tax authorities are entitled to request, in addition to the invoice, other supporting documents (such as activity reports, work certifications, etc.) demonstrating that the services acquired were used for the taxable transactions of the taxable party. Alternatively, the Court should determine whether the examination of the right to deduct VAT should be based solely on the direct relationship between the acquisitions and the supplies or services in the taxable party's overall economic activity.
    • The CJEU rules on the first question and states that the VAT Directive must be interpreted as meaning that the remuneration for intra-group services—provided by a parent company to its subsidiary and specified in a contract—which is calculated in accordance with a method recommended by the OECD Transfer Pricing Guidelines, and which corresponds to the portion of the operating margin exceeding 2.74% achieved by that subsidiary, constitutes consideration for a supply of services made for consideration and falls within the scope of VAT. Regarding the second question, the CJEU determines that the most appropriate interpretation of the Directive is that it allows tax authorities to require a taxable party claiming input VAT deduction to submit documents other than the invoice to prove the existence of the services referred to in that invoice and their use for the needs of that taxable party's taxable transactions, provided that the submission of such evidence is necessary and proportionate for that purpose.

Other decisions of interest:

  • Supreme Court ruling of 15 July 2025. Tax residence. Validity of a tax residency certificate.
    • The Supreme Court rules on cassation appeal number 4023/2023, filed against the judgment of the Andalusian High Court, which partly upheld the contentious-administrative appeals filed regarding the tax assessments and penalties imposed under the personal income tax (IRPF) for the periods 2014 to 2016. The issues raised, on which the Supreme Court must provide guidance, are, first, whether a judicial or administrative body may disregard the contents of a certificate of tax residence issued by the tax authorities of a country that has signed a Double Taxation Convention (DTC) with Spain, when that certificate is issued for the purposes of the Convention. Second, it is necessary to clarify whether, for the purposes of assessing the existence of a residence conflict between two States, the contents of a residence certificate issued by the tax authorities of the other contracting State under the DTC may be rejected, or whether the validity of such a certificate must be presumed, so that its contents cannot be disregarded precisely because the relevant Convention has been concluded. Finally, the last issue concerns whether a contracting State to a DTC may unilaterally determine, in the presence of a residence conflict, whether it is necessary to apply the tie-breaker rules provided in the DTC, requiring an autonomous and separate interpretation from domestic rules that contain similar concepts, and more specifically, whether the tie-breaker rule in Article 4.2 of the DTC—based on the “centre of vital interests”—is equivalent to the concept of “core of economic interests” in Article 9.1.b) of the Spanish Personal Income Tax Law (LIRPF).
    • The Supreme Court upholds the cassation appeal and, establishing a binding precedent, rules that, first, national administrative or judicial bodies do not have the competence to assess the circumstances under which a tax residence certificate has been issued by another State and, therefore, cannot disregard the contents of a certificate of tax residence issued by the tax authorities of a country that has signed a Double Taxation Convention (DTC) with Spain, when that certificate has been issued for the purposes of the Convention. Second, it establishes that, for the purposes of assessing the existence of a residence conflict between two States, the validity of a residence certificate issued by the tax authorities of the other contracting State under the DTC must be presumed, and its contents cannot be rejected precisely because the relevant Convention has been concluded. Finally, it establishes that a contracting State to a DTC cannot unilaterally assess the existence of a residence conflict while disregarding the specific rules established in the Convention for such cases. Accordingly, in the event of a residence conflict, it is necessary to apply the tie-breaker rules provided in the DTC, requiring an autonomous interpretation in relation to domestic rules involving similar concepts.

Administrative legal commentary:

Inheritance and Gift Tax (IGT)

  • Binding Ruling V0586-25 of 1 April 2025. ISD. Non-resident beneficiary.
    • The applicant, a resident of the United Kingdom, states that they will receive from their father, a resident of the Autonomous Community of Andalusia, a sum of money originating from a pension plan held in an account located in Andalusia. The issue raised concerns how the transaction described should be taxed, which regulations apply, and which tax authority is competent to collect the ISD.
    • The Spanish Tax Agency (DGT) responds to the query and determines, firstly, that under Article 7 of the ISD Law (LISD), taxpayers who are not residents of Spain are subject to the tax on a real obligation basis. Accordingly, the applicant will only be liable for ISD on the amounts received within Spanish territory, and since the account from which the donated funds originate is located in Spain, the applicant will be subject to ISD on the donation. Regarding the competent authority to collect the tax, pursuant to the Second Additional Provision of the LISD, which aligns the state regulations with the judgment of the CJEU of 3 September 2014, the applicant would generally be entitled to apply the regulations of the Autonomous Community where the funds have been located for the greatest number of days during the five-year period immediately preceding the date of the transaction. However, since the applicant is not a resident of any Spanish Autonomous Community and there is no connection with any of them, the competent authority to collect the tax is the Central State Administration, specifically the Spanish Tax Agency (Agencia Estatal de Administración Tributaria), through the National Tax Management Office, Inheritance Department for Non-Residents.
  • TEAC Resolution 00/06868/2024 of 27 June 2025. ISD. Deductibility of the debt under a real obligation.
    • The Central Economic-Administrative Tribunal (TEAC) rules, in a single instance, on the economic-administrative claim filed against the resolution of the reconsideration appeal issued by the National Tax Management Office regarding the ISD tax concept. The background of this procedure stems from the death of a person residing in Denmark and the filing of an ISD self-assessment by his wife—also a resident of Denmark—in relation to an apartment jointly owned by both, located in Spain. The main issue in this economic-administrative claim concerns the deductibility of the outstanding mortgage loan. The claimant seeks to have the outstanding balance of half of the mortgage, taken out jointly by her and the deceased with a Danish financial institution, recognised as a deductible debt from the inheritance, on the grounds that it is linked to the mortgage secured on the property transferred upon her husband’s death.
    • The Central Tribunal partially upholds the present economic-administrative claim and, reiterating the criterion set out in its ruling 00/01930/2019 of 26 October 2021, establishes that, in the case of debts deductible under a real obligation, an additional requirement must be met—compared to those deductible under a personal obligation—consisting of the direct link between the debt and the asset subject to taxation in Spain. Therefore, if the mortgage loan is intended for the acquisition of the property, the outstanding balance must indeed be considered a deductible debt. In the case examined, the purchasers applied for a loan to acquire the property while awaiting the mortgage, which was approved five months later. Consequently, since the mortgage was applied for and granted to pay for the property, the outstanding mortgage debt is considered an expense associated with the object of taxation and, as such, is deductible.

Other decisions of interest:

  • Binding Ruling V0614-25 of 1 April 2025. LGT. Valuation of foreign real estate (Form 720).
    • The applicant, an individual, owns several properties in Chile. They are unsure how to assess these properties so as to comply with the obligation to report assets and rights located abroad (Form 720). Therefore, the query concerns the correct valuation of the properties for the purpose of filing the informative declaration of assets and rights located abroad.
    • The DGT responds to the query and determines that, pursuant to Article 54 a.2. d) of the RGAT, the taxpayer must report the acquisition value of each property of which they are the owner. Regarding the acquisition value, the DGT refers to previous responses, including Binding Rulings V1316-13 and V3914-15. Specifically, in the latter ruling, the DGT indicated that the acquisition value is regulated in Articles 34 to 36 of the LIRPF, which contain definitions of acquisition value for onerous and gratuitous acquisitions. Moreover, according to the response in V3914-15, if the property was acquired gratuitously, Article 36 of the aforementioned LIRPF applies to calculate the acquisition value. Finally, it should be noted that for the purpose of determining the acquisition value, if the property was acquired in a currency other than the euro, the exchange rate set by the European Central Bank as of 31 December of the relevant fiscal year must be applied. This criterion was previously confirmed by the DGT in, among others, Binding Ruling V0737-21 of 29 March, which stated that, regarding the exchange rate, the value in euros determined by the European Central Bank on 31 December applies, in accordance with Article 36 of Law 46/1998 of 17 December, on the introduction of the euro (BOE of 18 December).
  • Binding Ruling V0615-25 of 1 April 2025. LGT. Declaration of foreign properties (Form 720).
    • The applicant is an individual who, during 2024, made advance payments to a property developer to purchase a residential property in the Dominican Republic. The property is still under construction, with delivery expected in 2026. The query concerns the obligation to submit the informative declaration on assets and rights located abroad using Form 720, taking into account that the property has not yet been delivered.
    • The DGT responds to the query and determines that, in accordance with the rules governing this obligation, set out in Article 54.a of the RGAT, and based on the statements provided by the taxpayer in the request, the response must start from the premise that the property in question is indeed under construction and that its delivery, notwithstanding any potential delays, is expected in 2026. Accordingly, it is understood that the property has not yet been acquired, and therefore the taxpayer is not required to submit the informative declaration on assets and rights located abroad (Form 720) until they acquire ownership of the property.