B Law & Tax
13 March 2024

Scope of the Constitutional Court’s Judgment Declaring Partial Annulment of Royal Decree-Law 3/2016

The Constitutional Court has declared the unconstitutionality of various provisions contained in the Corporate Income Tax Law, which restricted the offsetting of negative taxable bases, as well as deductions to prevent double taxation, and also required the reversal of losses from depreciated holdings previously deducted in prior fiscal years. These measures, incorporated through Royal Decree-Law 3/2016, have been deemed unconstitutional for exceeding the scope of emergency legislation and for affecting the essence of the principle of contributing to the maintenance of public expenses.

However, it is important to note that the judgment does not have fully retroactive effects but establishes certain limitations. According to the criteria of the Constitutional Court, tax obligations that have been definitively decided by final judgment or administrative resolution cannot be revisited to preserve legal certainty. Similarly, obligations that have not been challenged or rectified by the date of the judgment cannot be revisited.

In response to this situation, the State Tax Administration Agency has issued a statement outlining its position regarding certain scenarios that may arise. According to this note, the judgment will have full efficacy in inspection procedures, both ongoing and those initiated subsequently, and the legislation preceding Royal Decree-Law 3/2016 must be applied, disregarding the articles declared unconstitutional.

However, the note indicates that the judgment will not be applicable in cases pending contentious-administrative or appeal proceedings, provided that the unconstitutionality was not argued at the time of the judgment, by analogy with unchallenged cases and due to procedural limitations. Regarding cases pending economic-administrative appeals, the note does not provide a stance, awaiting the position of the Tax and Economic Administrative Court.

From our perspective, the position taken by the Tax Agency appears quite restrictive, and the effects of the judgment may be invoked in situations where the Administration obstructs its application, as well as in other scenarios not addressed in the aforementioned note. Therefore, it is recommended to meticulously analyze each specific situation to determine to what extent the pronouncement of the Constitutional Court may be invoked.

Lastly, it is important to highlight that other limitations introduced by Royal Decree-Law 3/2016 are still pending review by the Constitutional Court. The restrictions on the deductibility of losses in the transfers of holdings eligible for the deduction for double taxation and the deductibility of negative income earned abroad through a permanent establishment, as well as those associated with the transfer thereof, were outside the scope of the aforementioned judgment. Consequently, these matters may still be subject to claims before the Administration, awaiting a new pronouncement by the Constitutional Court on the same.

B Law & Tax International Tax & Legal Advisors.


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