Tax Newsletter - March 2023

The tax authorities cannot recharacterize a transaction without considering the parties’ true intention, nor can they deny that the decision on deducting input VAT or otherwise may be modified

The Supreme Court concluded that a sport club could deduct input VAT on the invoices of the footballers’ agents. It held that the recharacterization of the transactions by the inspectors (who considered that the agents were really providing services to the footballers rather than the club) is not correct because it does not take the parties’ wishes into account. The court validated that, after the inspection proceeding, the club implemented the authorities’ criterion (not deducting the input VAT) although it later applied for a refund (while the proceeding was brought before the tribunals), because the deduction of input VAT is not a tax option and, therefore, can be changed.

Dismissal presumed by silence from the authorities must allow an appeal for judicial review to be filed without exhausting administrative remedies

In a recent judgment, the Supreme Court concluded that taxpayers can file an appeal for judicial review directly where their applications for refund of incorrect payments are considered to be dismissed by silence, because the authorities cannot derive benefit from their own breaches or invoke failure to file the required administrative appeals where their acts are presumed (and, therefore, do not include information on the appeals regime).

The tax authorities cannot issue an assessment directly to the taxpayer where the party with the payment obligation under the law is the taxpayer substitute

The Supreme Court set aside an assessment issued to a taxpayer because the law stated that the tax obligation resided in the taxpayer substitute. According to the court, in these cases the substantive and procedural obligations belong to the substitute, and therefore, the tax relationship with the authorities is displaced towards the person in this role.

The taxpayer’s center of main interests must be examined from the standpoint of both the value and composition of assets in each territory

TEAC concluded that to determine whether a taxpayer’s center of economic interests is in Spain (for the purpose of determining the person’s residence and obligation to be taxed in respect of personal income tax) it is necessary to examine not only the value of Spanish assets compared with the value of assets in other countries, but also the nature of each of those sets of assets, and give more weight to active than to passive assets (which include financial investments).

Secondary liability events due to an interposed person or entity must be used with caution

The lifting of the corporate veil doctrine on which the types of secondary liability defined in the LGT (“General Tax Law”) are based must be applied only where any type of fraudulent conduct is observed (which will, generally, have to be sophisticated), because, according to TEAC, they are anti-abuse measures which have to be used restrictively.

The personal income tax and wealth tax return forms to be filed in 2023 have been published

At the end of March orders were published approving the personal income tax and wealth tax returns that will need to be filed until the end of June 2023.

For further details on this month’s judgments, decisions, resolutions and legislation, SEE THE WHOLE NEWSLETTER HERE.