Self-assessments may be corrected outside the voluntary filing period to claim tax benefits

Article 119.3 of the General Taxation Law (LGT) states that options which the tax legislation requires to be elected, requested or waived with the filing of a return may not later be modified, unless the correction is made in the voluntary filing period for the return for the tax concerned.

Based on that article, the tax authorities and the courts have found on a reiterated basis that, where an option is not elected within the filing period on a self-assessment, the taxpayer may not use the mechanism under article 120.3 LGT (unless they do so within the statutory period for filing the return). This article states that where a person with tax obligations considers that a self-assessment has had an adverse effect on their lawful interests they may apply for a correction of their self-assessment.

The flexibility with which the tax authorities and the courts are interpreting the concept of tax option has on repeated occasions led to taxpayers being denied their rights to offset tax loss carryforwards, or using other types of tax assets or incentives, where they have not made the election on self-assessments filed in the voluntary period (or have done so for an amount lower than the sum to which they were entitled).

The National Appellate Court concluded recently however that the decision to offset tax loss carryforwards or to do so in one amount or another may be modified after a corporate income tax return has been filed; and affirmed, among other things, that article 119.3 LGT relates to returns not to self-assessments. The December 11, 2020 judgment was discussed in our alert dated January 15, 2021 (here).

Other courts have been making the same findings. The Basque Country High Court, for example, did so in its judgment of October 19, 2020. The facts examined in this judgment concerned an entity that had not claimed a number of tax credits on its corporate income tax self-assessment, by mistake, despite satisfying the requirements in the legislation for these credits. It therefore applied for a correction of its self-assessment.

The court concluded that a failure, by mistake, to claim benefits is not a tax option and cannot be interpreted as a decision not to claim them, in that it is a right belonging to the person with tax obligations. As a result, there is no legal impediment preventing the taxpayer from using the self-assessment correction procedure to claim the benefits to which they are entitled.