According to two rulings of the Supreme Court, issued on May 30 and recently disclosed, hotel and restaurant businesses have the right to decrease the amount of Economic Activities Tax (IAE) corresponding to the period in which they had to close due to the coronavirus pandemic. These rulings establish that municipalities must proportionally reduce the tax they collect from bars, hotels and other companies in the sector, taking into account the time in which these businesses were forced to suspend their activities after the declaration of the state of alarm on March 14, 2020.
These decisions of the Supreme Court, which had previously ruled on the refund of IAE in other sectors, arose from two cases in which the Contentious-Administrative Court number 3 of Valencia had already ruled in favor of the reduction of the tax for two companies that had requested its refund. However, the Valencia City Council appealed those first rulings, which led the Supreme Court to review the cases on appeal and establish case law on the subject for other similar conflicts that may be pending in other instances.
Although the final result is similar, the new rulings have taken into account some objections presented by the Valencia City Council and have modified the argumentation used. In the previous instance it was considered that the decree that established the state of alarm implied the non-existence or lack of generation of the IAE. In other words, by imposing the inactivity of the companies in the sector, it did not make sense to charge a tax whose purpose is to tax economic activity.
Furthermore, the Supreme Court rulings specify that companies are not obliged to prove the stoppage or closure of their activities or to inform the Administration about it in their claims. This is because the closure situation derived directly from the legal regulations that were implemented, which required the closure of hospitality establishments as a sanitary measure to prevent the spread of the Covid-19 virus. Consequently, the Supreme Court determines that the two companies are entitled to have their claim considered and to recover a portion of the tax. In addition, none of the rulings impose the payment of court costs on any of the parties involved.
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