Spanish Constitutional Court judgement about the Advanced Corporate income tax payments system passed in 2016

On July 01, 2020 the Spanish Constitutional Court judgement has been made public according to which the full court estimates the question of unconstitutionality about the rules applying on advanced Corporate income tax payments approved by Royal Decree 02 / 2016 of Sept. 30.

Such question was lodged by the Spanish National Court when it considered that the minimum advanced Corporate income tax payment applying to big – sized companies infringed the principle of economic capacity recognized in the Spanish Constitution and was affecting the obligation to contribute, a matter which could not be dealt with through a Royal Decree.

The Court’s judgement declares that there are situations which cannot be reviewed: those decided through a court sentence as well as those which are consolidated in the administrative procedure as they were not appealed in due term and form.

To this respect, it is worth reminding that the minimum payment was applicable in October 2016 for the first time, a tax period which is not time barred to date.

✔ Spanish companies are obliged to pay on account of their final liability of each fiscal year during the months of April, October and December. Out of the two possible methods, the Spanish Constitutional Court (SCC) judgement resolves on the minimum payment on the accounting result, applying to companies invoicing, at least, 10 million euro.

The Spanish National Court lodge a question of unconstitutionality on the following matters:

• Whether or not Royal Decree 02 / 2016 that approved such measure was in conformance to the Spanish Constitution, given that it affected the obligation to contribute, a matter which cannot be regulated by a royal decree.
• The infringement of the principle of economic capacity, as it implied an arbitrary taxation that did not take into account the final tax quote that should be payable by Spanish companies.

✔ The Court judgement fully accepts the question of unconstitutionality as it considers that the obligation to contribute has been affected by the Royal Decree 02 / 206 as it has generated a “substantial alteration of the advanced payment form, given that the resulting amount is significantly different from the one that would finally result from the quantification of the final tax of which it is an advanced payment”. As the rule is declared unconstitutional and null, the SCC does not issue any opinion on the matter concerning the infringement of the economic capacity.

✔ The advanced payments have already been discounted from the annual Corporate income final tax quote. However, it could be considered the possibility of applying for late payment interest for the period running from the date of the advanced payment made up until the date of the final tax paid or of the annual refund obtained, should this be the case.

It is, therefore, recommendable reviewing the advanced Corporate income tax payments made based on such rule, which are those for fiscal years 2016 and 2017, and evaluate the convenience of filing an application, contesting the tax returns filed.