The importance of meeting deadlines on tax procedures
Spanish Supreme Court ruling, dated May 11, 2015, in response to the appeal for unification of doctrine filed by the company Yelmo Films, SL.
The issue is about the early exercise of the purchase action linked to a leasing contract between the submitting entity and Madrid Leasing Corporación Establecimiento Financiero de Crédito, S.A, on an immoveable property.
Based on Article 20.One.22 of the Spanish VAT Law, with the applying of the option to purchase the property it would be transmitted, such transmission would be subject and not exempt from VAT and, therefore not subject to Transfer Tax.
The entities involved in this transaction, apparently treated it correctly, specifying in the public deed that this transaction was subject to VAT. However, the Administration of Madrid understood that the transaction was subject to Transfer Tax, so the company was requested to pay this transfer tax on May 19, 2006.
YELMO FILMS, on 20 June 2006, filed appeal against the previous act, but this was dismissed for out of deadline submission (the deadline for the submission was 19 June).
Following this dismissal, YELMO FILMS, submitted an explanatory writ asking for the rectification of the VAT return and recovery of sums paid corresponding to VAT 2004, but the Administration did not answer this writ, so the Company submitted an economic-administrative claim, but it was dismissed by the Regional Administrative Court because it understood that the transaction was subject to VAT.
Under this situation, the transaction carried out by YELMO FILMS was being taxed by VAT and by Transfer Tax, i.e., it was being double taxed.
Finally, the Spanish Supreme Court decided the appeal for unification of doctrine ruling against the appellant, and even condemning the costs, based on the following reasons:
In relation to the submission out of deadline of administrative appeal against liquidation of the Community of Madrid by Transfer Tax, the Spanish Supreme Court understands that the declaration of late submission of the administrative appeal does not allow to enter to review the substantive issues raised, so it was never pronounce on the Transfer Tax issue.
In connection with the dismissal of the claim asking for the rectification of the VAT return and recovery of sums paid in relation to VAT 2004, the Spanish Supreme Court understands that comes the dismissal of this appeal for unification of doctrine because early exercise of the purchase option on leasing contract is subject and not exempt from VAT and is not taxed by Transfer Tax.