Iberia wins millionaire trial to Spanish Tax Agency
The Spanish airline company avoids paying 29 million euros of non-resident income tax to the Spanish Tax Agency because an unjustified inspection visit enlargement.
The Spanish airline company Iberia has won a twenty-nine-million trial to the Spanish Tax Agency. That Agency was claiming this amount by way of non-resident income tax’s deductions (IRNR) corresponding to fiscal years 2003 and 2004.
The Spanish Supreme Court, in a sentence enacted last June, ruled in favour to the Spanish airline. The facts date from 2007 when Spanish Tax Agency started a tax inspection to Iberia and, finally, through a settlement agreement’s notification, a twenty-three-worth million euros non-resident tax income’s fee and a six-million-euro-worth delay interest (which makes a total amount of 29 million euros) were claimed in 2009 to the airline.
Following the article 150.1 of Spanish General Tax Law, the inspection visit’s lenght should be completed in 12 months, unless, for some reasons, it will be declared such as “special complexity”. In this case, the inspection can be enlarged another twelve months more and that was the Spanish Tax Agency did, alleging the business’ big size and the huge amount of tax performances done.
As a consequence, Iberia firstly appealed to the Central Administrative and Economic Court (TEAC), which refused the complaint. After that, it appealed to the National Audience through an administrative-contentious procedure, which was partially accepted but resorted by the court although resorted by the tax authority.
In such a way, the issue ended up at the Spanish Supreme Court, which finally ruled in favour to Iberia because the Spanish Tax Agency was exceeded “its twelve-months limit’s inspection procedure by considering the twenty-four-months enlargement’s resolution as ineffective because it is not enough to invoke the business’s size to justify tax inspections as “special complexity” but it is necessary to analyse and to explicit in the enlargement agreement itself why those tax inspections are complex”.
That is the reason why the Spanish Supreme Court considers that the alleged reasons by the Spanish Tax Agency in order to define as “special complexity” its tax inspection activities against Iberia were not specified and, consequently, the Spanish airline company has been absolved from paying that non-resident income tax’ amount.
Undoubtedly this Spanish Supreme Court’s decision will give more juridical security to the businesses against tax authorities’ inspections.
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