Tax Newsletter

Case law:

Value Added Tax (VAT)

• Ruling of the Court of Justice of the European Union of 27 February 2025. VAT. Joint and several liability.
  • The European Court has heard Case C-277/24 concerning a request for a preliminary ruling from the Regional Administrative Court, Wrocław, Poland. The question the CJEU has to address is whether Articles 205 and 273 of the VAT Directive, in conjunction with Article 2 of the Treaty on European Union and Articles 17, 41 and 47 of the Charter of Fundamental Rights of the European Union as well as with the principle of proportionality, the right to a fair hearing and the rights of the defence as guaranteed by EU law, should be interpreted as precluding national legislation and a national practice based thereon which deny a natural person (a member of the management board of a legal person) the right to participate actively in the procedure for determining that legal person’s tax debt and at the same time to participate in separate proceedings seeking to determine that natural person's joint and several liability for the legal person’s VAT debt. Specifically, the CJEU has to decide whether the previous practice would deprive that natural person of an adequate means of effectively challenging the findings and assessments which have been made previously concerning the existence or the amount of that legal person’s tax debt, which decision therefore constitutes a precedent in those proceedings under a national provision confirmed by national practice.
  • The TJUE resolves the question referred for a preliminary ruling by stating that Article 273 of the VAT Directive, read in conjunction with Article 325(1) TFEU, the rights of the defence and the principle of proportionality, must be interpreted as not precluding national legislation and practice under which a third party who may be held jointly and severally liable for the tax debt of a legal person cannot be a party to the proceedings brought against that legal person to establish the tax debt of that legal person, without prejudice to the need for that third party, during any joint and several liability proceedings brought against that third party, to be able effectively to call into question the findings of fact and the legal classifications made by the tax authority in the context of the first set of proceedings, and to have access to the file of the tax authority, in accordance with the rights of that person or of other third parties.
• Supreme Court Ruling of 25 February 2025. VAT. Principle of comprehensive adjustment.
  • The Supreme Court settles appeal no. 960/2023 against the ruling of 23 November 2022 by the National High Court concerning the assessment for VAT relating to the fourth quarter of 2011. The question on which the Court has to rule is whether the principle of comprehensive adjustment is applicable to cases in which the tax authorities check VAT payments to be offset from previous periods where they seek to increase the resulting balance by including input VAT payments which were adjusted by the tax inspectorate in a conformity assessment giving rise to a final assessment which was not challenged by the taxpayer.
  • The Supreme Court dismissed the appeal and held that the principle of comprehensive adjustment was not applicable to the case described above. In other words, the principle of comprehensive adjustment does not come into play when the administrative finding from which the favourable consequence, in this case offsetting input VAT, is intended to be drawn has already taken place by means of its transfer to the proceedings for another transaction. In this respect, signing a certificate of conformity and the subsequent finality of the assessment resulting therefrom could only be changed in accordance with the rules laid down for the review of definitive measures, an initiative which does not appear to have been undertaken in this case.

Corporate Tax (CT)

• Supreme Court Ruling of 27 February 2025. CT. Cross-border transactions.
  • The Supreme Court settles appeal no. 1034/2023 against the ruling by the National High Court involving CT for the financial years 2011 and 2013. The issue at dispute is firstly whether, having examined the circumstances of the case, the presence of a cross-border element is sufficient in itself to declare the artificiality of a transaction from the point of view of national law and European Union law without analysing its taxation in other tax jurisdictions and without questioning the possible reasonableness of the transaction had it been conducted entirely in Spain. Secondly, to specify the scope of the judicial duty to ask the CJEU for a preliminary ruling on the potential conflict with European Union law of the administrative activity being prosecuted, or if this is not done, the duty to give sufficient grounds for the application to the case in question of the clear act or clarified act doctrine. And whether that abstention from raising the jurisdictional referral can be justified by the fact that an appeal to the Supreme Court may be lodged against its judicial decision, bearing in mind the limitations on the admissibility of such appeals in our legal system. Finally, a reference for a preliminary ruling is requested in the event that the Supreme Court considers that the original court has interpreted or applied European Union (EU) law in contradiction with the case-law of the Court of Justice in view of the allegation of infringement of the freedoms of establishment and movement of capital.
  • The Supreme Court dismissed the appeal and held that the presence of a cross-border element is not sufficient in itself to find that a transaction is artificial under national law and European Union law. Furthermore, the national anti-abuse clause, conflict in the application of the rule – section 15 of the GTA – has to be interpreted in accordance with EU law, which has considered that an overriding reason in the public interest which may justify the application of measures restricting fundamental freedoms is the prevention of abuse of tax rules. Here, and pursuant to the national anti-abuse clause, it has to be determined whether, having examined the circumstances of the case, the transaction in question allows total or partial avoidance of the taxable event or the reduction of the tax base or the tax debt through acts or transactions which are manifestly artificial and have no relevant legal or economic effects other than tax savings as a result of their use. Thirdly, it determines that the refusal to raise the jurisdictional referral to the CJEU by the division of the National Court may be justified by the fact that an appeal to the Supreme Court may be lodged against its ruling. Finally, it says that in the case in question it is not necessary for this division to ask the CJEU for a preliminary ruling since the issue raised is sufficiently clarified by its case-law.

Administrative Doctrine:

Value Added Tax (VAT)

• Binding Consultation V2576-24 of 12 December 2024. VAT. Capital increase.
  • The petitioner is a commercial entity that intends to carry out a capital increase by receiving from one of its partners a beneficial ownership right to business premises to be leased. Spain's Directorate General of Taxation (DGT) is asked whether this contribution is subject to VAT, and if so the tax base and the taxable person for VAT on this lease.
  • The DGT answers the consultation by stating that, firstly, the contribution of the beneficial ownership right made by the partner of the consulting company to its capital will be subject to VAT only if the partner is a businessperson or professional for the purposes of the tax under the terms of sections 4 and 5 of the VAT Act and the property covered by such right is used for an economic activity, such as leasing it, and is part of their business or professional assets. If the transaction were subject to VAT, constitution or transfer of beneficial ownership of the business premises in question would be considered as a non-exempt supply of services for VAT purposes and taxed at the general rate pursuant to section 90 of the VAT Act. Secondly, the tax base of the beneficial ownership contribution would be the total amount of the consideration agreed by the parties. However, to the extent that both parties are related, as would appear to be the case from the consultation letter, the special rule in section 79(5) of the VAT Act has to be taken into account. Finally, with regard to the taxable person for the lease, the DGT reiterates what has been previously stated elsewhere including in binding reply number V3435-16 of 20 July 2016 which said that in these cases it will be the consulting entity as the beneficial owner of the lease which will be the taxable person for the tax on the lease in question, and it will also be required to comply with the substantive and formal obligations derived from the tax regulations, essentially set out in section 164(1) of the VAT Act.

Personal Income Tax (PIT)

• Binding Consultation V2477-24 of 9 December 2024. PIT. Application of the “Beckham Act”.
  • The petitioner is an individual who has been working abroad for six years and has recently decided to register as a self-employed person to work in Spain. He asks whether he can avail himself of the special tax regime regulated in section 93 of the Personal Income Tax Act, popularly known as the "Beckham Act".
  • The DGT responds to the consultation by saying that pursuant to section 93(1)(c) of the Personal Income Tax Act, the only economic activities that taxpayers covered by this regime may carry out during the tax periods in which it applies are entrepreneurial economic activities, providing services to start-ups or training, research, development and innovation activities under section 93(1)(b) 3 and 4 of the Personal Income Tax Act. Thus with the exception of cases 3 and 4 of section 93(1)(b) of the Personal Income Tax Act, it is not possible to choose to apply the special tax regime in section 93 of the Personal Income Tax Act since the consultation letter does not sufficiently explain what kind of economic activity the petitioner is engaged in.