Impossibility to carry forward tax losses
The Spanish Tax Agency has recently issued some requests on Corporate Tax filed out of date and with tax losses carried forward, considering that it is not applicable. They are based on a resolution of the TEAC (Tribunal Económico Administrativo Central) of April 4th, which qualifies them as a tax option that is not applicable in late filings.
Does the TEAC sentence comply with the Law?
In accordance with the article 119.3 of the General Tax Act (GTA, Ley General Tributaria), the tax options that must be exercised, requested or refused with the FILING of the form and cannot be rectified, unless it is done during the regulatory period of declaration. According to our criterion, with that, the GTA EXPRESSLY states that the tax options are exercised with the filing of the tax Form, so until the Form is not filed, the taxpayer has not exercised any option, without having lost the right to exercise it.
Moreover, the same article indicates that when one an option is exercised, it can only be AMENDED if this rectification is made within the regulatory period of filing, assuming: (1) that if the declaration is not handed in, no option has been exercised to rectify and (2) that the option is exercised when the form is filed, indicating that it will be considered modified only if it is amended within the regulatory period of filing.
On the other hand, the resolution of the TEAC understands that allowing the tax losses carried forward in these cases benefits the taxpayers that filed the forms extra-time regarding those who comply with the tax obligations on time.
In this sense, we believe that understanding that allowing the carry forward tax losses is a “better condition” for the taxpayer who files the forms after the regulatory period is totally false, because who submits an extemporaneous form without prior request will be in a worse condition because of the surcharges of article 27 of the GTA on the amount to be paid or the corresponding fines.
Divergence of interpretations
A criterion different from that used by the Tax Agency, is established by the judgement of the TRIBUNAL SUPERIOR DE JUSTICIA DE LA COMUNIDAD VALENCIANA SALA DE LO CONTENCIOSO-ADMINISTRATIVO SECCIÓN 3 SENTENCIA 71/15 which says that the right of carry forward tax losses, should not be understood as included in the case of article 119.3 of the GTA, because it is not a true “option”, if not it is a right that could be exercised in a specific moment, including during a tax check procedure.
Therefore, it should be noted that there are rulings in this Court that go in the opposite direction to that used by the Tax Agency.
Finally, we would indicate that the proposals made by the Spanish Tax Authorities of not being able to carry forward tax losses, are referring exclusively to a single resolution of the TEAC that is not issued in unification of criteria, and that cannot be considered as reiterated case law because to exist reiterated case law, it will be necessary that there are two or more resolutions that apply the same criterion.
Consequently, we consider that the aforementioned resolution is not enough to apply this content in a generalized way to all the forms filed out of time where tax losses are carried forward.
We will see how the Administration responds from now on.