B Law & Tax
10 November 2023

Tax advisor: The Galician High Court (TSJ) indicates that the modification in installment payments by the 2018 LGP constitutes “improper retroactivity.”

The Court considers that Law 6/2018 has amended Additional Provision 14 of Law 27/2014, on Corporate Income Tax, for the tax period beginning on January 1, 2018 (and subsequent periods). Although this period was already underway, the modification was made before the accrual date (last day of the tax period). This is classified, according to the terminology of the Constitutional Court, as “improper retroactivity,” allowed in our legal system.

 

The High Court of Justice of Galicia, in its decision on September 25, 2023, analyzes the possibility of retroactively applying Article 71 of Law 6/2018, which amends Additional Provision 14 of Law 27/2014 on Corporate Income Tax, especially regarding installment payments. The plaintiff argues that, during the filing period of the self-assessment for the first installment payment of the Corporate Income Tax in 2018, the only rule supporting the minimum payment was Royal Decree-Law 2/2016, declared unconstitutional. It contends that the first payment in 2018 lacks legal support, as Law 6/2018, which could have provided it, was approved on July 3, 2018, and cannot be applied retroactively.

In resolving the conflict, the Court begins by analyzing the nature of Corporate Income Tax installment payments. It is argued that the obligation to make these payments cannot be considered independently of the main tax obligation. This is because the amounts paid as installment payments are relevant in the calculation and settlement of the main tax obligation, which is directly related to the occurrence of the taxable event of the tax, the tax period, and the accrual.

After presenting the above, the court’s evaluation focuses on the mentioned modification made by the General Budget Law of 2018 (LGP de 2018). In this context, the Court maintains that, in this particular case, Law 6/2018 has altered Additional Provision 14 of Law 27/2014, of November 27, on Corporate Income Tax, for a specific tax period, that which began on January 1, 2018 (and subsequent periods). This change occurred when the tax period was already underway but the accrual had not yet occurred (which happens on the last day of the tax period). According to the terminology of the Constitutional Court, we are dealing with “improper retroactivity,” which is allowed in our legal system.

In light of the above, the installment payment corresponding to the first quarter of the 2018 tax year is supported by Additional Provision Fourteenth of the Corporate Income Tax Law as amended by Law 6/2018 and Law 8/2018. Both are current legal regulations and, therefore, are fully applicable, leading to the dismissal of the present administrative appeal.

 

 

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