In view of various administrative actions that have been repeated in recent years, it is worth remembering that the effectiveness of tax incentives, as instruments for the dynamization and competitiveness of our economy, requires giving the utmost relevance to the legal certainty that must preside over both the legal definition of their requirements and budgets and the correct application by the tax enforcement bodies and courts.
The principle of good regulation (regulated in Article 129 of Law 39/2015 on Common Administrative Procedure) attributes to the Administration the responsibility to guarantee the principle of legal certainty in the exercise of the regulatory initiative, which must be consistent with the legal system (national and European Union), in order to generate a stable, predictable, integrated, clear and certain regulatory framework, which facilitates its knowledge and understanding and, consequently, the action and decision making of individuals and companies. The Administration must also guarantee the principle of legal certainty in the application of the rules, with absolute respect for their provisions.
This principle of legal certainty acquires great importance in the application of tax incentives or benefits (which, by their very nature, generate or may generate a lower tax burden to favor certain taxpayers to the detriment of others, objectively generating inequality). In other words, it is necessary that the management and inspection bodies of the Tax Administration exercise the necessary control to ensure that they are applied only in the cases expressly and strictly provided for in the regulations, but also that, in the application of their functions, they guarantee that the tax incentives can be enjoyed by those who meet the requirements established in the regulations.
The Supreme Court (SC) and the Court of Justice of the European Union (CJEU) have been establishing guidelines and interpretative criteria, which, in our opinion, would provide the necessary objectivity and legal certainty in the analysis of the application of tax benefits and incentives. In the following lines we analyze these guidelines and criteria.
Firstly, according to the consolidated doctrine of the SC, although the interpretation of tax benefits must be “strict” (not restrictive), in accordance with the literal interpretation of the text of the rule that regulates them, their application must always respond to the purpose of the legislator. For this High Cort, although the spirit or purpose of the rule cannot be invoked to create a different text of the rule, such purpose will be essential to confirm or guide its literal interpretation. In other words, the interpretation of the rule cannot lead to a result contrary to its letter, but neither will it be possible to demand requirements for the enjoyment of the tax benefit that are not foreseen in the corresponding precept (see, among others, SC judgements 475/2023, of April 13, 365/2022, of March 23, 1642/2022, of December 13 or 302/2023, of March 9).
In short, in those cases in which any of the requirements foreseen in the legal definition of the tax benefit are not met, the tax benefit cannot be applied, even if its application could be justified on the basis of a teleological interpretation of the rule (Ruling 1148/2023, of September 19). But also, in the opposite sense, the application of a specific tax incentive should be admitted if the taxpayer meets all the requirements and assumptions regulated in a clear and precise manner by the legislator, even if the interpreter considers that such legal definition should have excluded assumptions finally included (judgment 356/2018, of March 6).
On the other hand, with respect to the rules of interpretation of the tax benefits incorporated into our legislation as a result of the transposition of European directives such as Directive 2009/133/EC (mergers, spin-offs, contributions of assets and exchanges of shares) or Directive 2011/96/EU (parent-subsidiary), it is consolidated doctrine of the CJEU that, in order to avoid divergences of interpretation, provisions or concepts taken from Community law must be given a uniform interpretation, whatever the conditions under which they are to be applied (judgments of 18 October 1990 in joined cases C-297/88 and C-197/89 and of 17 July 1997 in case C-28/95).I
In accordance with the case law of the CJEU, the prohibition of abusive practices is a general principle of EU law that prevents rules from being invoked in the exercise of an abusive practice, the burden of proof of which lies with the Administration. In order to prove the existence of an abusive practice, there must be (i) an objective element, consisting of the fact that, despite formal compliance with the requirements established by the EU rules, the objective pursued by the latter has not been achieved; and (ii) a subjective element, consisting of the will, proven with objective elements, to obtain an advantage derived from the EU rules, by carrying out purely formal or artificial operations, lacking any economic and commercial justification. In this sense, the concurrence of a certain number of indications may prove the existence of an abuse of law, provided that these are objective and concordant (CJEU judgment of 26 February 2019 in case C-116/20).
In other words, in accordance with the case law of the CJEU, tax benefits should only be excluded in exceptional cases in which the requirements set out in the rule are met but their purposes are not achieved, interpreted strictly; and only if there are objective elements (that can be verified by the Administration) that prove the artificiality of the operations, lacking economic reality.
From all of the above it can be deduced that (the Administration being responsible for the proper application of the tax rules and regardless of possible situations of abuse) the necessary “strict” (but not restrictive) interpretation of the tax incentives must always be carried out in favor of the legal security of the operators, avoiding situations of controversy which, justified in hypothetical finalist interpretations of the rule, actually correspond to subjective or clearly restrictive interpretations.
In practice, however, very restrictive interpretations have been observed, which are not consistent with the applicable rules, in the review by the tax authorities of the application of numerous tax incentives.
As an example, suffice it to cite the regularizations of the exemption provided for in Article 14.1. h) of the Non-Resident Income Tax Law for dividends distributed to non-resident partners based in the European Union, based on the fact that the receiving partners are not their effective beneficiaries (as has been understood with investment fund holding companies, whose ultimate partners are residents outside the European Union) and this even though the specific anti-abuse clause of our legislation does not expressly require such a requirement, derived from a mere interpretation of the rule, would violate legal certainty and would contravene, on the one hand, the doctrine of the SC, since it restricts the application of the tax benefit by demanding a requirement (that of beneficial owner) that is neither foreseen nor defined in the literal wording of the applicable rule; and, on the other hand, it would also contravene the CJEU case law, to the extent that a fully lawful structure, created for commercial reasons and powers of disposal, can hardly be considered artificial. Furthermore, to conclude in a generalized manner in this sense would leave out of the parent-subsidiary directive an entire sector of activity, which is prohibited by the case law of the CJEU.
This is not the only example, but it is a significant one; and it invites special attention, in the corresponding appeals, to the case law we have just commented on, which emphasizes, as we have seen, the importance of legal certainty in the application of taxes.
