What are the legal developments in tax matters in 2023?

Throughout this year, relevant jurisprudence in tax matters has been issued. From Gentile Law, experts lawyers in tax legal advice, we explain these developments, analyzing the new tax implications after these changes that should not be neglected. 

(i) What is the "tax lease" and does it constitute State aid according to the Court of Justice of the European Union? 

"Tax lease" is a trilateral fiscal policy for naval operations which aims to reduce the taxes paid for vessel purchases. It requires the intervention of a private investor, a shipping company, and an Economic Interest Grouping (EIG). This system allows companies to buy ships at a discount of up to 30% compared to the shipyard price. This occurs thanks to the intervention of the EIG from whom the vessel is purchased. This operation allows the investors to obtain tax benefits and the shipping company to obtain large reductions in ship prices.

The financial policy generated debates at the European level. After several complaints, the European Commission concluded that the tax lease for ships favored only certain investors and members of Economic Interest Groupings, thus constituting State aid. Providing tax advantages only to certain groups goes against the proper functioning of the internal market and is prohibited by Article 107 of the Treaty on the Functioning of the European Union. Consequently, the Commission requested the recovery of the benefits unduly received by the investors. 

The Court of Justice of the European Union, however, has partially annulled what was previously established by the European Commission, concluding that the ship tax lease did not only favor the identified beneficiaries. It determined that it was not possible to ask for the return of the benefits from the investors since other beneficiaries of this unduly received aid would also have to be identified. 

(ii) Should late payment interest in favor of the taxpayer be included in the income tax (IRPF)? 

Another relevant tax update occurred with the Spanish Supreme Court ruling of January 12, 2023, which estates "late payment interest paid by the Tax Agency when making a refund of undue income". Which makes us question whether these should be subject to income tax or whether, on the contrary, they are exempt from this one. 

Previously it was established that late payment interests were not subject to income tax. The Spanish Supreme Court understood that through the payment of such interests there was no "capital gain" but rather a "rebalancing" to compensate for the damage suffered. 

With the ruling of January 12, 2023 (rec.n 2059/2020), the Spanish Supreme Court modified its jurisprudence and changed its criteria with respect to late payment interest. This new ruling concludes that the interest must be considered as "capital gains" and therefore must be included in the general taxable income of the taxpayer. 

(iii) Can the administration question the values of a property provided by a taxpayer? 

The Spanish Supreme Court has also ruled on the practice of value checks by the Tax Administrations. In 2018, it established that it had to be the Administration itself the one to expose the reason why the value expressed of the property by the taxpayer did not correspond to the real value of the property.

By the ruling of January 23, 2023 (rec.n 1381/2021), the Spanish Supreme Court reaffirms this opinion. It is therefore the task of the Administration to state in the communication of the initiation of a procedure why they do not accept the values that the taxpayer expresses, the arguments justifying such doubt, as well as the means of verification used. 

These requirements are justified by the Spanish tax system since this one gives the taxpayer the responsibility to delcare such values. Therefore, these contributions must be presumed to be true, and the Administration cannot question them without stating the reason why it considers the values to be uncertain. 

(iv) What is the delinquent list and who can be included in it? 

The list of delinquent taxpayers is a register that includes situations of non-compliance with tax obligations of taxpayers. The ruling of the Spanish Supreme Court of 20 January 2023 (rec. n 1467/2021) and 25 January 2023 (rec. n 465/2021) have stated that fundamental rights, such as the right to intimacy, privacy, or honor, must be respected in the inclusion in the list of delinquent taxpayers. This is guaranteed due to the principle of proportionality.

The inclusion must always follow a public interest objective and always verify that the data processing is in accordance with European Data Protection Regulations. Finally, the inclusion must only be carried out if there are no other less harmful means, that would help to achieve collection of the debt. Finally, the inclusion in the list of debtors must only be made if there is a firm tax penalty.

(v) How are transfers of real estate by financial institutions to be treated and are they taxed under the IAE heading on the development of buildings? 

The Spanish Supreme Court ruled that, banking institutions do not have to pay taxes on the development of buildings if the transfer of the buildings constitutes an ancillary activity to the main financial activity. Consequently, any transfer of real estate by financial institutions made in the context of a foreclosure of a mortgage guarantee is only to be considered as "residual" and will only be taxed under IAE headings 811 and 812. 

Gentile Law Tax Team 

abogados@gentile.law

+34 91 435 45 19