Spain: Spain opens door to impose penalties on contrived acts or transactions
The General Taxation Law (LGT), Law 58/2003 of December 17 2003, has been partially amended by Law 34/2015 of September 21 2015.
The preamble to Law 34/2015 explains that the reform seeks to strengthen legal certainty, prevent tax fraud and increase effectiveness in administrative procedures. The legislation also implements, however, the mandate contained in article 305.5 of the Criminal Code and defines the procedure for assessments linked to a possible criminal offence against the public treasury.
Another new addition is the requirement to publish the names of certain debtors of the public treasury, which has been broadened by Organic Law 10/2015, of September 10 2015, to apply to judgments handed down on tax fraud matters. An attempt is also made to resolve certain specific problems, in particular regarding the statute of limitations, the length of inspection proceedings and the actions taken to recover fiscal state aid. Lastly, penalties are introduced for certain cases of conflict in the application of a tax provision.
In accordance with article 15 of the LGT, conflict in the application of a tax provision is a general anti-avoidance clause applicable to acts or transactions which, taken separately or as a whole, are clearly contrived or inappropriate if those acts or transactions do not give rise to any significant legal or economic effects other than the saving of tax and the effects that would have been obtained by more usual or appropriate acts or transactions. Its application requires the involvement of a consultative commission, as determined in article 159 of the LGT, which is a purely administrative body acting only in these cases. Additionally, article 15.3 of the LGT laid down that no penalties could be imposed on these acts or transactions, on top of the reassessment and obligation to pay the tax due plus late payment interest. The 2015 reform changes precisely this element, by allowing a penalty to be levied while at the same time amending article 179 and introducing a new article 206 bis in the LGT.
Under article 206 bis, failing to pay all or part of a tax debt or obtaining tax refunds incorrectly via a conflict in the application of a tax provision, that is, via acts or transactions that are abusive without being sham arrangements, will be a tax infringement. But the infringement only arises where there is a substantial similarity between the case being reassessed and another or other cases in which an administrative standard has been established and that standard has been made public. The new tax infringement seems to lie more in a discrepancy from the standard expressed by the tax authorities than in the contrived nature of the transactions performed. In addition, article 179.2 of the LGT is amended to determine that, in these cases, it cannot be considered, unless there is proof to the contrary, that the taxpayer took due care to perform his tax obligations and that he made a reasonable interpretation of the law, which are circumstances set out in this subarticle as grounds for precluding fault. This raises constitutional problems in light of the right to the presumption of innocence and of the case law of both the Constitutional Court and the Supreme Court.
The reform of the LGT has therefore attached an administrative fine to the application of this general anti-avoidance rule. For this fine to apply, there must be a pre-existing administrative standard that has been made public in relation to the type of acts or transactions performed by the taxpayer. The reform has reignited the debate on whether it is constitutional to levy penalties in these cases. For one camp of commentators, this occurs frequently in comparative law. The legislation has also moved away from the old notion of abuse of law, for which penalties had been precluded on a constitutional basis. It is equally true, however, that as things now stand the preclusion of penalties could find support in the principle that penalties must be lawful and the precedent contained in paragraph 93 of the CJEU Halifax judgment which requires a clear and unambiguous legal basis for imposing penalties in these cases, in conjunction with article 49 of the EU Charter of Fundamental Rights.
Abelardo Delgado (firstname.lastname@example.org), Madrid