Tax Newsletter - April 2014

05 / 27 / 2014

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Much attention is being given to the judgment by the Court of Justice of the European Union (CJEU) on the so-called “health cent” (case C-82/12, Transportes Jordi Besora, S.L.). In that judgment, the CJEU held that the Spanish law establishing the tax on the retail sales of certain oil and gas products infringes Directive 92/12, on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products.

The practical effects of that judgment and the procedure and limits regarding the refund of the taxes collected incorrectly are being widely debated. In this connection, the Cataluña High Court, in its judgment of March 28, 2014, recognized:

The appellant’s right to a refund of the incorrect tax payments, plus the applicable late-payment interest.
The existence of two procedures for obtaining repayment of the amounts incorrectly paid: (i) application for a refund of incorrect payments (which seems to be the only option for refunds relating to open tax periods) and (ii) claim for economic liability (on which no further opinion was given, since it did not come into play in the case analyzed in that judgment).

On the proceeding for determining allowable refunds, the Court found that this must be done in the enforcement of a judgment, a proceeding in which issues relating to the “double refund risk” and the “correct proof of the amounts claimed” must be examined.

I. Judgments

1. Corporate income tax.- If a US investment fund operates under legislation equivalent to that of the EU, it should be given the same treatment as the funds of that Member State (Court of Justice of the European Union. Judgment of April 20, 2014, in case C-190/12)
2. Personal income tax.- The 60% reduction in income from immovable capital also applies to losses (Madrid High Court. Judgment of January 14, 2014)
3. Inheritance and gift tax.- Registration on the Spanish civil union register is not a basic requirement to apply the reduction rate (Madrid High Court. Judgment of November 12, 2013)
4. Inheritance and gift tax.- Kinship by affinity ends with the death of the spouse who was the blood relative (Madrid High Court. Judgment of October 31, 2013)
5. Tax on retail sales of certain oil and gas products (IVMDH).- Obligation to refund the “health cent” due to its incompatibility with European legislation (Cataluña High Court. Judgment of March 28, 2013)
6. Inspection proceedings.- Obligation for inspectors to carry out a complete reassessment (Valencia Autonomous Community High Court. Judgment of November 14, 2013)
7. Administrative proceeding.- Validity of the certificate of up-to-date tax obligations issued to another payer (Galicia High Court. Judgment of November 13, 2013)

II. Judgments and rulings

1. Corporate income tax.– Subrogation to tax losses in a merger in which the absorbing entity is subject to central government legislation and the absorbed entities are subject to Basque or Navarra provincial legislation (Directorate-General of Taxes. Ruling V0440-14, of February 18, 2014)
2. Corporate income tax.– Nondeductibility of contingent liabilities not covered by provisions according to accounting principles (Directorate-General of Taxes. Ruling V0435-14, of February 17, 2014)
3. Personal income tax.- 40% reduction not applicable to lump sum payment received by employee who takes partial retirement (Central Economic-Administrative Tribunal. Decision of February 6, 2014)
4. Nonresident income tax.- Tax credit to avoid domestic double taxation does not apply to dividends paid to an EU company owning less than 5% of a Spanish company (Central Economic-Administrative Tribunal. Decision of March 5, 2014)
5. Transfer and stamp tax.– Exemption established in Law 2/1994 applies to novation of mortgage loans (Directorate-General of Tax. Rulings V0382-14, of February 14, 2014 and V0437-145, of February 18, 2014).
6. Inspection proceeding.- Delays attributable to the taxpayer do not count for computing the term to agree on extension of tax inspection proceedings (Central Economic-Administrative Tribunal. Decision of March 5, 2014)
7. Collection proceeding.- Failure to provide the security on time automatically invalidates deferral or payment in installments, with no notice required (Central Economic-Administrative Tribunal. Decision of February 27, 2014)
8. Collection proceeding.- The stay of negative decisions is not automatic, but will depend on each particular case (Central Economic-Administrative Tribunal. Decision of February 27, 2014)
9. Review proceeding.- Proof can be provided in the appeal for reconsideration if otherwise the taxpayer’s due process rights would be denied (Central Economic Administrative Tribunal. Decision of January 23, 2014)
10. Penalty proceeding.- Penalty proceeding can be initiated before the assessment decision is notified (Central Economic-Administrative Tribunal. Decision of February 19, 2014)

III. Legislation

1. Annual Tax and Customs Control Program for 2014
2. Effective annual interest rate for the second calendar quarter of 2014, in order to classify certain financial assets for tax purposes
3. Approval of the forms relating to the exemptions for supplies of goods to be used in free zones and warehouses, and for customs and tax suspensive arrangements
4. Personal income tax and net worth tax returns for 2013