The National Court has brought before the Constitutional Court the increase in corporate tax that the Government approved in 2016 through a royal decree-law that is still in force today. The then Minister of Finance, Cristóbal Montoro, promoted the regulations with the aim of increasing tax collection and bringing Spain closer to the public deficit reduction objectives required by the European Union. The legislation is still in force.
According to the order to which La Vanguardia has had access, the National Court raises the question of unconstitutionality as a result of a case of a Spanish industrial company that challenged the self-liquidation of 2016 before the courts.
“We believe that there are many possibilities that the Constitutional Court will admit this appeal for processing. The Public Prosecutor’s Office also pronounces itself in the same sense because it is key to determine the constitutionality of the norm to resolve this specific caseâ€, points out Miró Ayats, a lawyer specializing in tax litigation and partner of the Cuatrecasas law firm, which represents the plaintiff company.
It is the second time that the National Court raises the unconstitutionality of this royal decree-law. A couple of years ago he filed an appeal but it was dismissed due to formal defects. “This time, we believe that the criteria of applicability and relevance concur,” says Ayats, who expects to receive a pronouncement from the TC within four or five months, approximately.
In his opinion, there are two reasons that could knock down the regulations. The first is the alleged modification of key aspects of corporate tax. “The Constitution allows the royal decree-law to legislate tax matters as long as it does not affect basic taxes, such as companies or personal income tax. In this case, everything indicates that the norm substantially affects companiesâ€, he says. The second reason is the possible violation of the rule of the principle of “economic capacity” based on which each taxpayer must contribute to public spending.
The decree-law requires companies of a certain size to pay taxes for their losses, which increases their contribution to corporation tax. Specifically, the rule requires companies with a turnover of more than 20 million and which are now in profit to return deductions for losses from previous years within a period of five years. In addition, the law increases the limits on the compensation of negative tax bases generated in previous years, limits the application of deductions to avoid international or internal double taxation and prohibits the deduction of losses derived from the transfer of shares in entities.
“If the appeal is successful, the annulment of the decree will have a strong impact on the business fabric. Many companies could be encouraged to resort to the self-assessments that they have carried out in recent yearsâ€, indicates Ayats.
