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The Supreme Court urges the Treasury to prove the abuse of the non-resident exemption

Date: June 19, 2024 Time: 12:54:38

Chamber III of the Supreme Court has established doctrine so that the burden of proof of the abuse that prevents taking advantage of the exemption in the Non-Resident Income Tax (IRNR) corresponds to the Tax Administration and not to the taxpayer. In a ruling of the High Court that Europa Press collects, the jurisprudence of the High Court of Justice of the EU is thus applied, already established in sentences of the years 2017 and 2019, and modifies and adjusts its doctrine to the same relation to the interpretation of the ‘anti-abuse clause’ included in article 14.1h of the consolidated text of the Law on said tax.

The General Administration of the State raised in an appeal that the burden of proof of the application of the exemption contained in the aforementioned article 14.1.h, and consequently the demonstration that the ‘anti-abuse clause’ does not apply, corresponded to the obligor taxpayer, who benefits from it. However, the Supreme Court analyzes the CJEU’s doctrine on the matter, contained in two judgments from 2017 and another from 2019, and concludes that the burden of proof of abuse lies with the Tax Administration.

In the sentence that sets this criterion, the Supreme Court dismisses the appeal of the General State Administration against a sentence of the National Court of May 21, 2021, which gave the reason to a company that, in February 2010, did not practice withholding on account of the IRNR for a dividend distribution of 7 million euros to its parent company resident in Luxembourg, considering that it was found exempt in accordance with article 14.1.h of the consolidated text of the Law.

The Tax Agency, after an inspection, established in March 2014 a liquidation to said company with a debt to enter for importation of 838,753.43 euros, of which 700,000 euros corresponded to quota and 138,753.43 euros to interest on late payment. to understand that the exemption used in the aforementioned article was not applicable, since the taxpaying entity had not demonstrated the existence of valid economic reasons for the constitution of the Luxembourg parent entity.

Reverse the burden of proof

The National Court, in the sentence now confirmed, thought that the Treasury incurred in a presumption of exclusively fiscal purpose, violating the doctrine of the CJUE, by reversing the burden of proof against the company’s allegations that it invoked the existence of economic motives. He added that it is the Tax Administration that must justify the budgets for the application of the ‘anti-abuse clause’, requiring further proof from the latter.

The Supreme Court, after making an exhaustive review of the jurisprudence of the CJEU, agrees with the Court, considering that in any case it corresponds to the Treasury, and not by contributing to it, to prove the assumptions of application of the ‘anti-abuse clause’ by going to the different means of information provided for in double taxation agreements or the Information Exchange Directive (DAC).

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Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.
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