The Personal Income Tax law establishes several deductions from the Tax quota in favor of residents in the cities of Ceuta and Melilla. The most important (article 68.4.1º) benefits the recipients of income obtained in the old North African prisons, who can deduct the aforementioned local income. Prior to 2018, the deduction rate was 50%. However, the PGE Law for 2018 raised the percentage to 60%, currently in force.
It is true that article 68.4.2º also grants the deduction of 60%, without the habitual residence of the recipient being necessary, to holders of accrued income and obtained in Ceuta or Melilla. However, the 2nd ordinal itself prevents the benefit of the deduction, among others, for work income, and income from deposits or accounts in banking institutions located in either of the two territories. Which subtracts almost all of its economic value from the deduction. Therefore, I will approach the question from the perspective of the ordinal 1º.
What should be understood by residence in Ceuta or Melilla? The expressed precept refers to taxpayers who have their habitual and effective residence in one of the two cities beyond the Strait.
The Tax Agency has always considered that the phrase used by article 68 – “habitual and effective residence” – is an automatic translation of article 9 of the Tax Law itself. In other words, people who -this is the most frequent case- reside in Spanish territory for more than 183 days during the calendar year are IRPF taxpayers. The Agency also argues to support this conclusion that article 68 is inexorably linked to article 72 of the same legal text, which regulates the habitual residence of personal income taxpayers in each autonomous community (a regulation that, in substance, coincides with that of the already cited article 9).
However, the concept of “habitual residence” (for the general purposes of the Tax) does not necessarily have to coincide with the “habitual and effective residence” that the law prescribes to make the deduction for obtaining income viable in Ceuta and Melilla. The High Court emphasizes that the Personal Income Tax Law does not establish a detailed and explicit criterion on the different varieties of work income that can be attributed to the territories of Ceuta and Melilla, in addition to specifying that the term “residence” is not univocal. The Supreme Court, once established that the term “residence” has a polysemic nature, affirms that it can also be applied to cases of “non-residence” (not included in article 9 of the Tax Law).
Finally, the TS establishes the following doctrine: “All of which should lead us to respond to the question with objective appeal interest, in the sense that by habitual residence in Ceuta and Melilla, according to the version applicable to the case for temporary reasons of Article 68.4.1 of the LIRPF, must be understood as a factual assumption, so that taxpayers who, at least during a part of the tax period, have resided in
Ceuta or Melilla, are entitled to the deduction in proportion to the time of residence in said cities.
In the present case, the taxpayer had carried out his job as an employee, during certain working days, in Ceuta, and also in various periods – always less than a year – during 2016, 2017 and 2018 on secondment. According to the TS, after the reform of article 68.4.1º by Law 6/2018 (with effect from January 1, 2018), the deduction, in addition to cases in which the taxpayer has his habitual residence in Ceuta and Melilla , can also be applied to the income obtained in said cities during temporary displacements (with overnight stays) to them by taxpayers who have their habitual residence in an autonomous community (Ceuta and Melilla are not, they only have the status of “cities with status ”). of autonomy”).
Or what is the same: the deduction does not require a vocation of permanence or roots of the taxpayer in Ceuta or Melilla. The residence, simply, is a material reality. It should be specified that the TS does not set a minimum period of days in which the taxpayer must “reside” in Ceuta or Melilla to obtain the benefit of the deduction. “It is enough, then –as a TEAC resolution that I will mention later says- {….]the fact of residing or dwelling as a material and effective reality in Ceuta and [sic] Melilla, understanding this expression as merely living or temporarily dwelling in said territories.”
Despite the argumentative and dispositive clarity of the TS ruling, and also despite its binding nature for all public Administrations, the Tax Agency has been going through the lining of the TS doctrine. Although there are always “insurgents” [sic] that respect the jurisprudence. Like the TEAR of Asturias which, by means of an agreement of July 15, 2022, obeyed the higher criteria of the TS, recognizing the right to deduction of a “worker displaced” to Ceuta. What turned out to be quite scandalous for the Director of the Department of Tax Management of the Agency, who, raising a cry to heaven, filed an extraordinary appeal with the TEAC for the unification of criteria. To unify what? Perhaps to unify the doctrine established in appeal by the TS? It was sung: the TEAC (resolution of July 24, 2023) has dismissed the appeal of the Tax Agency, obeying point by point the doctrine on the issue set by the TS.
We can also see the matter from a beneficial perspective, from the side of economic activity, investment and job creation. The Director of Tax Management is a stimulus for the manufacture of paper mills.
