Tax Newsletter - July, August and September 2023

The EU General Court annuls the Third Decision of the European Commission on financial goodwill

According to the court, the principle of legitimate expectation, depending on the date of acquisition, must also apply to indirect acquisitions. See the summary in our publication dated September 27, 2023.

When determining the income of a permanent establishment, only management and general administrative expenses related to its activity can be allocated to it

The Supreme Court rejected that, in determining the income of permanent establishments (and therefore, the income that will be exempt in Spain and the expenses that will be deductible at the head office), management and general administration expenses must be allocated to them under proportionality rules not by taking into account the extent to which those expenses are related to its activity.

Severance paid to senior executives who hold office as directors can benefit from the treatment provided for multi-year income

According to the Supreme Court, under the relationship absorption theory, the severance pay for executives with contracts for services may benefit from the 30% reduction provided for income generated over more than two years. The court recalled that the fact of holding a contract for services cannot be used to deny workers’ rights.

The principle of proportionality established in EU Law must be observed in penalty proceedings

The Supreme Court has set aside the 10% penalty in respect of not reporting on a VAT self-assessment amounts that should have been charged under the reverse-charge mechanism, based on the principle of proportionality under EU law. This was analyzed in our blog dated September 12.

The voiding of assessments issued against the company entails the voiding of assessments issued to its shareholders

TEAC has concluded in two decisions that adjustments for related-party transactions between shareholder and company must observe the bilaterality principle. In other words, if the courts set aside the assessment issued for the company, they must also set aside the assessment issued for the shareholder.

The deferment of tax liability on underlying capital gains is not a tax advantage for the purpose of applying the neutrality regime

The DGT has confirmed that, if the neutrality regime is questioned for a transaction, only the sought tax advantage may be adjusted, which does not include the deferral of tax liability inherent to the regime itself.

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