Administrative procedure

TEAC continues adding flexibility to the definition of “tax option”

Central Economic-Administrative Tribunal. Decisions of May 14 and April 2019

The General Taxation Law provides (article 119) that tax options may only be rectified within the filing period for returns determined in the regulations, but does not define the meaning of “tax option”. The Central Economic-Administrative Tribunal (TEAC), for its part, has in a large number of decisions broadened the definition of tax option. In three recent decisions, it concluded that the following are tax options:

  1. Reporting capital gains on a collection (as opposed to a due and receivable) basis on personal income tax returns.
  2. Offsetting tax losses on corporate income tax returns.

In line with this view, TEAC affirmed that:

  1. After election of the option to report capital gains on a collection basis on a personal income tax return, this option cannot be modified by filing a supplementary return, even if this return is filed because an amendment to the legislation occurs under which this collection basis makes the taxpayer worse off.
  2. If a corporate income tax return is filed outside the time limit, no losses may be carried forward for offset on that return. In other words, if the option to offset is not elected within the time limit, it must be concluded that the taxpayer has chosen not to make the offset, and this decision is unalterable. Outside that time limit, the option may only be elected in exceptional cases in which the circumstances at the end of the filing period set by the regulations had changed in relation to the existing losses.


Audit procedure

The taxpayer’s own appraisal is not an option when the comparable uncontrolled price method is used

Central Economic-Administrative Tribunal. Decision of February 14, 2019

As part of an audit an assessment decision was rendered in respect of personal income tax. Specifically, the adjustment related to the arm’s length value of a transaction between the party with tax obligations and the company in which it was shareholder, determined using the comparable uncontrolled price method.

In the economic-administrative claim the taxpayer pleaded, among other issues, that the assessment decision was null and void because it did not inform about the taxpayer’s right to submit its own expert appraisal.

TEAC dismissed the claim and concluded that the taxpayer only has the right to submit its own expert appraisal when one of the pricing methods set out in article 57.1 of the General Taxation Law has been used, and the uncontrolled comparable price method does not appear among them.


Review procedure

AEAT cannot introduce new arguments in appeals brought against regional economic-administrative tribunals’ decisions

Central Economic-Administrative Tribunal. Decision of June 11, 2019

The Andalucía Regional Economic Administrative Tribunal (TEAR) rendered a decision concluding that where a personal income taxpayer fails to report a gain obtained on the transfer of their principal residence, it must be considered that the taxpayer has elected the option to claim the exemption for reinvestment in the taxpayer’s principal residence, even if the option was not expressly elected on the tax return.

The head of AEAT's tax management department filed an ordinary appeal against that decision, which contained an argument that (i) had not been used by the authorities in the challenged administrative act, (ii) or examined by the TEAR. Specifically, it contended that it could not be considered that this option had been elected because the new residence had not been made into the taxpayer’s principal residence.

While TEAC shared this new argument by AEAT submitted in the appeal (as it mentioned obiter dicta), it dismissed the appeal because it considered that arguments cannot be raised in an ordinary appeal, or requests or petitions submitted that are clearly separate from those set out by the authorities in the acts challenged in the economic-administrative jurisdiction at first instance, and which could not be settled by the regional or local economic-administrative tribunal.


Review procedure

Penalties for a breach of statistics obligations for the INTRASTAT system cannot be the subject-matter of an economic-administrative claim

Central Economic-Administrative Tribunal. Decision of May 22, 2019

A penalty was imposed on a taxpayer for breaching a statistics obligation for the INTRASTAT system. Based on the appeal information footnote included in the administrative decision containing the imposed penalty, the appellant filed an economic-administrative claim with TEAC.

TEAC did not admit the claim because it held that penalties for a breach of statistics obligations for the INTRASTAT system cannot be the subject-matter of an economic-administrative claim. It affirmed in this respect that the INTRASTAT system is a specific mechanism for gathering information for the purposes of drawing up statistics which falls outside matters related to “application of the government's taxes or of the surcharges imposed in relation to those taxes and the imposition of tax penalties”, as set out in article 226 LGT.

In line with this, TEAC ordered the procedure to be rolled back so that the administrative agency that rendered the challenged administrative decision could notify the party with tax obligations correctly of the appeals available against that decision.


Enforcement procedure

If a stay is not requested, late-payment interest accrues in respect of the length of time taken over and above a year to settle the claims

Central Economic-Administrative Tribunal. Decision of February 14, 2019

The auditors rendered an assessment decision, which was appealed by the taxpayer to the Valencia TEAR, despite which the taxpayer paid over the debt. After the claim was upheld, AEAT set aside the assessment decision and refunded the sums paid over, along with the relevant amount of late-payment interest.

The head of AEAT’s audit department filed an ordinary appeal that was upheld by TEAC, which meant the debt was claimed once more from the taxpayer. In an appeal against enforcement, the taxpayer pleaded that late-payment interest should not have been charged for the length of time in excess of the one-year period the TEAR and TEAC had to settle the appeals filed against them.

TEAC set aside the appeal by concluding that the rule mentioned by the taxpayer only applies when a decision has been rendered to stay payment of the tax debt. In other words, insofar as the taxpayer had not applied for a stay of enforcement of the tax debt when it filed its claim, the accrual of late-payment interest cannot be restricted even if the economic-administrative tribunals have not decided within the specified time limit.