Spanish VAT refund claim for non-established entities. Right to the process of hearing prior to the resolution of the Spanish Tax Authorities
Judgment of the Spanish Central Administrative Court of 22 September 2015.
A company established in a Member State of the European Union different from Spain, submitted in 2010 before the Spanish Tax Authorities a VAT refund claim by the special procedure established for entities not established within the Spanish VAT territory (hereinafter SVT) but established in another EU Member State, The Canary Islands, Ceuta or Melilla.
The Spanish Tax Authorities denied that claim considering that services received were advertising services which in such a case were not located in the SVT and therefore charging a VAT quota for those services was wrong.
As a consequence of this decision of the Spanish Tax Authorities, the Company filed an appeal for reconsideration that was resolved with a partial refund estimation, accepting the refund of VAT quotas corresponding to the invoices issued by company A, but rejecting the refund of VAT quotas corresponding to the invoices issued by company B, which were those relating to the services considered by the Spanish Tax Authorities as advertising services.
Against the agreement of partial refund, the Company submitted an appeal before the Spanish Central Economic Administrative Court based on the following arguments:
– that the services whose return is rejected, are not advertising services as it defends the Spanish Tax Authorities, but supplies of goods with installation or assembly
– that the entity complies with the requirements established in the Spanish VAT Law on VAT refund claims to non-established entities
– that the Spanish Tax Authorities have not met the requirements to ensure the rights and guarantees of the tax payers in tax procedures, in particular, have not been reported proposed settlement prior to the practice of settlement so that the interested can formulate allegations, in accordance with the provisions of the General tax law.
Before these allegations the Spanish Central Economic-Administrative Court met saying that, although the special procedure for refund of VAT to non-established entities has an own regulations which does not provide for a procedure of hearing or of allegations prior to the resolution adopted by the Administration, the hearing process is enshrined in the General tax law as a right of the taxpayer not being possible to do without the same except in cases assessed by the same General tax law which do not concur in the procedure in question.
Therefore, the Spanish Central Economic Administrative Court concludes that the decrease of the guarantees of the tax payers on the development of the VAT refund procedure to non-established entities, is not justified and must be recognized their right to process of hearing prior to the resolution to be adopted by the Spanish Tax Authorities.
So, this Spanish Court cancelled the refusal agreement issued by the Spanish Tax Authorities, having to roll back actions at the time to notify the interested party motion for a resolution in which it is granted the corresponding process of audience.