By resolution no. 3890/2022, issued on March 28, 2023, the Central Economic Administrative Court (TEAC) has ruled on an extraordinary appeal for the unification of criteria. In this resolution, the TEAC establishes a criterion in relation to the irrevocability of the election between joint or individual taxation in Personal Income Tax (IRPF). In general terms, the choice between joint or individual personal income taxation is irrevocable once the period established for filing the corresponding tax return has ended. However, this irrevocability must be interpreted in the context of ‘rebus sic stantibus’, i.e., based on the existing circumstances or as long as these do not change significantly. Therefore, if there is a substantial change in the circumstances that led to the initial choice, the taxpayer must be granted the possibility of changing the choice initially made through the procedures contemplated by the legislation in force, such as the filing of a rectifying self-assessment, a supplementary return or within the framework of a verification procedure, provided that such change is not attributable to the taxpayer.
Conclusions of the TEAC
– In its opinion, the literal content of Article 119.3 of the General Tax Law (LGT) establishes that, as a general rule, the options are irrevocable once the period established for the filing of the return in which they were exercised has elapsed. Consequently, with specific regard to the choice between joint or individual personal income taxation for a tax year, it could not be modified, in principle, for that period once the legal period for filing the return has expired, in accordance with the provisions of Article 83.2 of the Personal Income Tax Law. This general rule is based on reasons of legal certainty and to avoid possible abuses by taxpayers.
– The Supreme Court has established exceptions to the rule of irrevocability of tax options. If there is a substantial modification of the circumstances that led to the election, and the principles of tax fairness and economic capacity are affected, the taxpayer may change its option. However, it is required that the taxpayer acts in good faith and there are no indications of tax violations. The Administration is obliged to allow the taxpayer to choose again the most favorable option according to its criteria.
– The Central Economic Administrative Court (TEAC) has adopted the jurisprudence established by the Supreme Court in several resolutions. According to this doctrine, the irrevocability of tax options must be understood in the context of “rebus sic stantibus”, i.e., as long as circumstances do not change significantly. However, if there is a substantial modification in the circumstances that led to the choice of a tax option, the taxpayer must be allowed to change his choice using the procedures established by the legislation in force, such as the filing of a rectification of the self-assessment, a complementary return or within the framework of a verification procedure.
– In relation to the option for joint/individual personal income taxation, the possibility of rectifying the initial election after the deadline for filing the return has been recognized. This is allowed in case of material error or change of objective circumstances not attributable to the taxpayer.
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