Tax Bulletin August September 2012

These forms of taxation include, most notably, charges for occupying local public land, challenged by cell phone operators against numerous Spanish municipalities in proceedings that have lasted more than 10 years.

On July 12, 2012, the judgment of the European Court of Justice (“ECJ”) making a preliminary ruling on a question referred by the Spanish Supreme Court was published. The ECJ upheld the claims of two of the main cell phone operators in Spain in relation to the above-mentioned charges. The question was resolved by direct application of EU law and on terms that almost wholly defeat any attempt by Spanish municipalities to charge cell phone operators which do not own the network installed on local public land, but use it to provide their services. The ECJ has been unequivocal in its ruling on the incompatibility of the charges with the EU Directives forming part of the “Telecommunications Package.”   

The preliminary ruling illustrates the growing importance of knowing EU law when defending the position of certain economic sectors, as it transcends any legislative issues arising in a domestic context. Thus, the supremacy of EU law and, above all, the possibility it offers to private citizens to invoke its direct application before the national authorities and courts make it an essential tool for defending taxpayers’ rights in the tax arena.
 
CONTENTS

1. JUDGMENTS 
1.1 “Exit tax” where residence is transferred to another EU Member State (European Court of Justice. Judgments of June 12, 2012, in Case C-269/09 and September 6, 2012, in Case C-38/10) 
1.2 Corporate income tax.- Tax authorities cannot review tax losses incurred in statute-barred years and offset in non-statute-barred years (National Appellate Court. Judgment of May 24, 2012) 
1.3 Personal income tax.- Method for recognizing installment sale transactions requires prior express schedule of payments identifying when they become due and payable (National Appellate Court. Judgment of May 23, 2012) 
1.4 VAT.- Six-month time period for applying for refund of input VAT paid by nonresidents is a mandatory time limit (European Court of Justice. Judgment of June 21, 2012 in Case C-294/11) 
1.5 VAT.- Portfolio management service that includes taking decisions on securities purchases and sales and implementing those decisions is not VAT exempt (European Court of Justice. Judgment of June 21, 2012, in Case C-44/11) 
1.6 VAT.- Input VAT on part of a capital item used temporarily for private purposes (European Court of Justice. Judgment of June 21, 2012 in Case C-334/10) 
1.7 VAT.- Right to deduct input VAT cannot be refused just because issuer of invoice has committed irregularities, without proof that party seeking to deduct the VAT was aware of them (European Court of Justice. Judgment of June 21, 2012 in joined Cases C-80/11 and C-142/11) 7
1.8 Transfer and stamp tax.- Capital duty self-assessment must be filed even though capital increases are exempt (Madrid High Court. Judgment of June 6, 2012) 
1.9 Collection proceeding.- Late payment of self-assessed tax cannot trigger surcharge if self-assessment was filed on time (National Appellate Court. Judgment of April 4, 2012) 
1.10 Tax characterization.- Finding of existence of fraud not appropriate in years after those in which the transaction deemed to have been performed as fraud upon law took place (National Appellate Court. Judgment of July 24, 2012) 
1.11 Charges.- Charge for the special use of local public land by cell phone companies that do not own the networks is contrary to European Law (European Court of Justice. Judgment of July 12, 2012, in Joined Cases C-55/11, C-57/11 and C-58/11) 
 
2. DECISIONS AND RULINGS 
2.1 Corporate income tax – Tax treatment of implicit interest in deferred price transaction without interest (Directorate-General of Taxes. Ruling V1674-12, of July 31, 2012) 
2.2 Corporate income tax.- Time limit on offset of losses does not apply in fiscal year in which company is dissolved and liquidated (Directorate-General of Taxes. Ruling V1583-12, of July 19, 2012) 
2.3 Corporate income tax.– Cooperatives cannot apply reduced rates for reduced-size enterprises to noncooperative earnings (Directorate-General of Taxes. Ruling V1510-12, of July 12, 2012) 
2.4 Corporate income tax.– Loss incurred from sale of shares repurchased on same day is deductible, provided shares not sold under a repurchase agreement (Directorate-General of Taxes. Ruling V1506-12, of July 10, 2012) 
2.5 Corporate income tax.- Directors’ fees only deductible if recognized for accounting purposes in income statement as expense (Central Economic-Administrative Tribunal. Decision of June 26, 2012) 
2.6 Corporate income tax.– In unrestricted depreciation/amortization, the depreciation/amortization recorded is the minimum limit (Directorate-General of Taxes. Ruling V1301-12, of June 15, 2012) 
2.7 Corporate income tax.– Adjustments to reserves resulting from first-time application of PGC will be taken into account when calculating double taxation tax credit provided for in article 30.5 TRLIS (Directorate-General of Taxes. Ruling V1287-12, of June 14, 2012) 
2.8 Personal income tax.– In installment sale or deferred-price transactions, change in period when price becomes due and payable will not affect initial time schedule for recognition for tax purposes of capital gain or loss (Directorate-General of Taxes. Ruling V1484-12, of July 10, 2012) 
2.9 Value added tax.- Late charging of VAT is no bar on its deductibility (Central Economic-Administrative Tribunal. Decision of June 21, 2012) 

3. LEGISLATION 
3.1 Corporate Income Tax Regulations amended by new Collective Investment Undertaking Regulations 
3.2 Spain-Germany tax treaty 
3.3 Clarification of increase in VAT rate for certain supplies of goods and services 
3.4 Transfer of real estate and of securities in real estate companies by credit institutions 

4. MISCELLANEOUS 
4.1 Bill on Tax Measures for Energy Sustainability