Spain – Regional Administrative Tax Court Acknowledges the Application of EU Law over Previous Discriminatory National Law
The Madrid Regional Administrative Tax Court (known as “TEAR”) in a decision dated 29 November 2011 (notified on 27 December 2011) acknowledges the application of EU Law over previous discriminatory National Law on the treatment of EU resident pension schemes (in this particular case, a UK pension fund). In this regard, the TEAR specifically refers to the Spanish National High Court of Justice (“Audiencia Nacional”) which delivered a judgment regarding withholding taxes levied on three Dutch pension schemes in Spain.
The TEAR states that the tax treatment suffered by the non resident UK pension fund in Spain during FY 2004 was discriminatory under EU Law compared to a resident Spanish pension fund. The TEAR stressed that the Spanish tax law was discriminatory on the grounds of nationality as well as violating one of the four main principles of EU Law, namely the free movement of capital (Art. 63 TFEU). In addition, the TEAR reiterates that since 1 January 2010, the Spanish domestic legislation was amended as a result of said discrimination in order to be compliant with EU principles.
Nonetheless, the TEAR does not directly grant the refund of unlawful tax paid, sending back the case file to the Spanish tax authorities so they may start a verification proceeding in order to assess whether the UK pension fund is comparable to a Spanish pension fund. If the outcome of the verification proceeding is positive, the TEAR says that the refund plus late payment interest must be made accordingly.
It should be noted that the TEAR is an administrative tax revision body of the Spanish tax authorities and this decision departs from the previous decisions which upheld the rejection of the refunds issued by the tax authorities.
According to Spanish rules on the statute of limitations, and taking into account that the amended legislation which ended the discrimination entered into force on January 1, 2010, EU pension funds could claim back 2008 and 2009, which is highly recommended now that even the revision bodies of the STA have a positive approach with regard to the application of EU principles.