Tax Newsletter

Personal Income Tax

• Supreme Court Ruling of 16 March 2023. Personal Income Tax (IRPF). Form 720. Consequences of the Ruling of the CJEU of 22 January 2022.
  • The appellant filed a supplementary Income Tax return in 2015 to regularise a capital gain not justified through the repealed article 39.2 of the Income Tax Act, as well as submitting Form 720. This resulted in an automatic request for rectification, and subsequently a claim to the tax appeal board and a judicial administrative appeal, all rejected on the grounds that there was no limitation period and, moreover, it is understood that the non-applicability of any limitation period was compatible with European Union Law.
  • The conflict underlying this case involves determining whether, pursuant to the Ruling of the CJEU of 27 January 2022 which declares this provision contrary to Community law, it would be contrary to this law to refuse the request for correction and repayment resulting from the late submission of Form 720.
  • The Supreme Court ruled by ratifying the content of the Ruling of the CJEU of 27 January 2022, and did not admit that the lower court should apply the presumption of non-applicability of any limitation period to unjustified regularised capital gains, as this presumption is contrary to the case-law of the CJEU.
• Binding Query V0442-23 of 27 February 2023. Personal Income Tax (IRPF). Tax residence. Spain-Soviet Union double taxation treaty.
  • As a result of the conflict in Ukraine, the petitioner was obliged to leave his country and settle in Spain. In Spain he continues with his job, working online as self-employed. He issues his invoices to his clients in Ukraine and receives payments through a Spanish bank.
  • The question for the Tax Directorate to decide is whether for tax purposes, he is resident in Spain, taking into account that for the purpose of Ukraine law he continues to be a Ukrainian resident.
  • Using the criteria established to determine whether a person is considered a tax resident in Spain, the Tax Directorate understands that if the petitioner remained more than 183 days in Spain in 2022, he will be considered a resident. If it is true that he is also considered a tax resident in Ukraine, there would a conflict of residence, which should be resolved according to article 1.3 of the double taxation treaty between Spain and the Soviet Union of 1 March 1985.

Temporary Solidarity Tax on Large Fortunes

• Binding Query V0424-23 of 24 February 2023. Temporary Solidarity Tax on Large Fortunes (ITSGF). Regime for expatriate workers. Tax obligation for assets in Spain.
  • The petitioner is subject to the special Income Tax obligation for expatriate workers, so he is subject both to this obligation for assets in Spain and to Wealth Tax.
  • The query raised consists of deciding whether, given the link with Wealth Tax, he will be liable for the Temporary Solidarity Tax on Large Fortunes for assets and rights in Spain (obligación real) or for the total of all his assets and rights (obligación personal).
  • The Tax Directorate is aware of the similarity of the arrangements for the Temporary Solidarity Tax on Large Fortunes and Wealth Tax, with the only difference being the calculation of the taxable event, and the express reference made to the Wealth Tax Law. It therefore considers that the petitioner, who is duly subject to the special regime under article 93 of the Income Tax Law, and thus pays Non-resident Income Tax, is subject to the Temporary Solidarity Tax on Large Fortunes on his assets in Spain.

Value Added Tax

• Ruling of the Court of Justice of the European Union of 30 March 2023. VAT. Concept of taxable person and economic activity. Municipalities are not subject to tax for activities or transactions carried out as public authorities.
  • A Polish municipality, through a company selected following an invitation to tender, provides a service installing renewable energy systems to local residents, by means of which they pay 25% of the cost and the municipality 75% through subsidies. The Polish tax authorities considered that, within the framework of this activity, the municipality was classified as a taxable person for the purposes of VAT, as it considered that it was engaged in a public activity not related to its public authority.
  • The question posed to the CJEU is to determine whether the delivery by a local institution working through a private company of installation services for renewable energy systems to local residents, for which the residents pay a price covering a quarter of the cost, may be considered a delivery of goods or provision of services for the purpose of VAT.
  • The CJEU answered the question by explaining that this activity may not be considered a delivery of goods or provision of services for the purposes of VAT, as the intention is not to obtain income on a continuing basis, and only part of the consideration received by the residents who desire the installation is covered.

Special Tax on Non-Reusable Plastic Packaging

• Binding Query V0414-23 of 23 February 2023. Special Tax on Non-Reusable Plastic Packaging (IEEPNR). Taxability. Adhesives.
  • The petitioner is an association of entities representing companies which manufacture, print and handle labels. Among their products, which are incorporated into the packaging, are the following: (i) pressure sensitive labels, which are sticky labels placed on the surface of packaging; (ii) shrink sleeve labels, which adhere to the packaging by shrinking when heated; and (iii) wrap around labels, which adhere by hot melt technology applied to the external packaging.
  • The question raised is whether on the assumption of non-taxability of the intra-Community manufacture, import and acquisition of adhesives, if the products described above enter into this category.
  • The Tax Directorate has used the interpretative criteria of article 3.1 of the Civil Code, to consider that the term adhesive used in article 73.c) of Law 7/2022 refers to a substance which, when placed between two bodies or fragments, glues them, as well as stickers and adhesive bands. As a result, product (i) is not considered subject, while the other two are taxable, as they are not covered by the concept described.
• Binding Query V0412-23 of 23 February 2023. Special Tax on Non-Reusable Plastic Packaging (IEEPNR). Taxable event.
  • The petitioning company is dedicated to the intra-Community acquisition of plastic spools which it then sells to other clients who use them for cutting cloth and similar.
  • The question raised consists of determining whether these products are subject to the Special Tax on Non-Reusable Plastic Packaging.
  • The Tax Directorate has answered that as the product is a semi-manufactured plastic product designed for the production of packaging, it is subject to the tax. However, under article 75.1.g) of Law 7/2022, if it obtains from the buyers a prior declaration according to which they declare the products will not be used to obtain packaging which forms part of the taxable event for the purpose of the Special Tax on Non-Reusable Plastic Packaging, it may receive an exception for them.
• Decision by the Central Tax Appeal Board of 22 March 2023. General Tax Law (LGT). Management procedure. Competence. Special regimes.
  • The appellant is an entity which is subject to the special VAT regime of a group of companies, using an aggregate information form. The Spanish Tax Agency initiated a limited verification procedure which concluded through a provisional settlement in which it refused to admit that 50% of the acquisition fee of a vehicle is tax deductible, as its use for business activity could not be demonstrated. In response, the appellant claimed that under article 141.1.e) of the General Tax Law, the verification of compliance with the requirements applicable to special tax regimes corresponded to an inspection procedure.
  • The conflict which underlies this issue consists of determining whether by means of a limited verification procedure, a taxpayer subject to a special regime can be regularised when this does not mean the verification of compliance with the requirements for applying the regime or has an effect on the rules of said regime.
  • The Central Tax Appeal Board considers that under the case-law of the Supreme Court, management procedures may be used to regularise the situation of taxpayers subject to a special regime if the regularisation refers to the common rules of the tax. Therefore, this regularisation would not have been applicable if it was a case of verifying compliance with the requirements for applying the regime, or is based on its specific rules.