“Tax amnesty” annulled
Tax Alert 2-2017
On June 8, 2017, the Constitutional Court has annulled Additional Provision no. 1 of Royal Decree-law 12/2012, of March 30, 2012, which introduced the special tax return known as “tax amnesty”. This return allowed taxpayers of personal income tax, corporate income tax and nonresident income tax, owning assets or rights that did not correspond to income reported for those taxes, to file a return to regularize their tax situation (in general, reporting their assets at 2010 fiscal year-end).
According to the Court, the instrument used to approve that additional provision (a Royal Decree-law) is not valid, given that the return in question affects the essence of the duty to contribute to sustaining public expenditure (article 31.1 of the Constitution), substantially altering the distribution of the tax burden.
The Court has reached this conclusion based on (i) the importance of the taxes affected (and mainly of personal income tax and corporate income tax) within the Spanish tax system, (ii) the possibility of regularizing the situation at a reduced rate (10%), replacing and cancelling outstanding tax liabilities for those taxes and being exempt from late-payment interest, surcharges and penalties (in other words, partially forgiving both the principal tax obligation and its accessory consequences); and (iii) the consequence of the return, which is that the reported assets take on the status of “reported income” for all effects and purposes.
According to the Court, that does not preclude the measure from being justified by the seriousness of the economic crisis (which requirement can be necessary but not sufficient, from a constitutional perspective), or alter the fact that the OECD issued recommendations to promote special voluntary filings to increase public income in times of crisis, or that other countries have regulated similar procedures.
The Court ends by stating that, in any case, the final tax situations produced as a result of that provision cannot be inspected as a consequence of the nullity of the provision, pursuant to the constitutional principle of legal certainty.
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