B Law & Tax
03 October 2023

Tax advisor: The Spanish Tax Authorities warn about the legal uncertainty caused by the continuous change in the Supreme Court´s criteria

The doctrine of the Supreme Court establishes, since January of this year, that late
payment interest related to improper income refunds are subject to taxation in the
Personal Income Tax (IRPF) and are included in its general base as non-
transferable capital gain. A ruling by the Supreme Court has thus modified the
doctrine established in 2020 and has sparked a debate on the temporal effects of
jurisprudence. The Council for the Defense of the Taxpayer warns that the
continuous changes introduced by the new regulation of cassation appeals, in force
since 2021, are creating legal uncertainty among taxpayers. Therefore, they consider
it essential for the Supreme Court to maintain the position that the Central Economic-
Administrative Court (TEAC) has held up to now.

This is an issue that affects not only the tax field but also, at the very least, all areas
of administrative litigation. According to the Council, the new regulation of cassation
appeals has significantly altered the situation, especially in tax matters. The technical
complexity of the system and the absence of a minimum threshold to access
cassation appeals have resulted in frequent changes of criteria, which are
sometimes corrected in a short period of time. Furthermore, they believe that criteria
are established based on the resolution of individual cases that, due to their
particularities, may not be suitable for developing a doctrine of general application.

This body, which is part of the State Secretariat for Finance, points out that the Law
regulating Administrative Jurisdiction does not include provisions on the temporal
effects of jurisprudence or on the Supreme Court’s capacity to limit the time of its
judgments, unlike what happens with judgments of the Court of Justice of the
European Union, for example. This lack of foresight generates legal uncertainty and
is especially detrimental to taxpayers who have filed their self-assessments following
the current interpretative criteria and who, unexpectedly, may be affected by a
change in jurisprudence.

The Central Economic-Administrative Court (TEAC) has maintained a position that
the Council recommends respecting. “If a taxpayer, as a result of the Supreme Court
judgment of December 3, 2020 (case No. 7763/2019), filed their Personal Income
Tax (IRPF) self-assessment without including late payment interest paid by a tax
authority due to an improper income refund, they would be protected by the principle
of legitimate trust if, subsequently, after the publication of the Supreme Court
judgment of January 12, 2023 (case No. 2059/2020), which considers these interests
subject to taxes, the tax authority attempted to adjust their tax situation based on this
latter judgment, as past situations cannot be adjusted to the detriment of the

Since the debate is open, the Council believes it would be appropriate for the
Supreme Court to issue a unifying and guiding statement. Such a statement could
occur soon, considering that several cassation appeals have been admitted in 2022
on this matter. “There may be agreement or disagreement on the timing that the
TEAC considers relevant to apply the change of criterion, which, according to its
position, is not the one in force on the accrual date, but the one applicable when the
obligation must be fulfilled, upon filing the self-assessment. However, there is no
doubt that we are dealing with a clear criterion that provides legal certainty” states
this body.

Additionally, they recommend, in line with the analysis carried out by the Fide
Foundation, that Spain consider the possibility of adopting a solution similar to that of
European Union law, which could limit the retroactivity of its decisions, taking into
account the good faith of those involved and the risk of serious disruptions that this
could cause.



B Law & Tax International Tax & Legal Advisors.


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