The Built Environment

Values assessed by a Regional Authority for Spanish Transfer Tax purposes and their effect on Personal Income and Corporate Income Taxes

Published on 22nd Jan 2020

The application of the values assessed by a Regional Tax Authority, (in the context of transfers for consideration and their subjection to Spanish Transfer and Stamp Duty Tax for the purposes of direct taxes (Personal Income Tax and Corporate Income Tax), is a controversial issue.

Although Spanish case-law has determined that controversy between the principles of "uniqueness" and "compartmentalisation" ("unicidad" vs. "estanqueidad") for tax purposes should be overcome, Tax Authorities have been reluctant to apply, for Personal Income Tax ("PIT") and Corporate Income Tax ("CIT") purposes, values assessed by a Regional Tax Authority in the context of Transfer Tax ("Transfer Tax" ("Impuesto sobre Transmisiones Patrimoniales Onerosas y Actos Jurídicos Documentados") .

According to the principle of "compartmentalisation" and in direct contrast to the principle of "uniqueness", the value assessed for the purposes of a particular tax should not automatically determine the value of this item (real estate or any other asset) for the purposes of another tax. In other words, Spanish State Tax Authorities, for instance in the context of a PIT audit, would not consider themselves bound by a previous valuation of a particular asset carried out by a Regional Authority, with jurisdiction over Transfer Tax.

In the context of PIT, the case-law of the Spanish Supreme Court especially in relation to transfer pricing (see rulings dated 18 June 2012 – appeal num. 224/2009 –, 15 January – appeal num. 1370/2013 – and 21 December 2015 – appeal num. 2068/2014 –) concludes that the principle of "uniqueness", given that the taxes under review are aimed at establishing the real or the market value of the assets transferred, allows for the value assessed for the purposes of Transfer Tax to be applied also in the context of a PIT assessment.

It should be noted, however, that not all Tax Authorities have yet accepted this criterion. Therefore, Tax Authorities may still reject the application of a value assessed for the purposes of Transfer Tax on the basis of the wording of article 35 of Law 35/2006, on Spanish Personal Income Tax, which defines the acquisition value of an asset as the amount for which such acquisition has been carried out and the transfer value as the amount effectively paid.

As regards CIT and also in the context of transfer pricing, case-law (see rulings dated 9 December 2013 – appeal num. 5712/2011 – and 21 December 2015 – appeal num. 2068/2014 –) also favours the application, for CIT purposes, of values assessed for Transfer Tax; all on the basis of the "uniqueness principle".

Accordingly and although it does seem that the criterion is not being universally applied by Spanish Tax Authorities, two important rulings must be highlighted:

  • A ruling of the Spanish National Court dated 30 November 2018 (appeal number 226/2015). In a case between independent parties, the Court applied the principles established by the Supreme Court in its ruling dated 21 December 2015, mentioned above, and allowed the taxpayer to rely, for CIT purposes, on the value assessed in the context of Transfer Tax.
  • A ruling from the Spanish Central Tax Tribunal ("Tribunal Económico Administrativo Central") dated 14 May 2019. In a share capital reduction with transfer of real estate, considered as a related-party transaction, the Tribunal applied the value assessed for Transfer Tax purposes (capital duty tax) to the taxpayer's CIT.

To conclude, although Spanish Courts tend to apply the "uniqueness" principle and, therefore, allow the value assessed for transfer tax to be applied to direct taxation situations (PIT and CIT), Tax Authorities have not yet uniformly accepted this criterion as regards PIT and are not applying it either in the context of CIT. Future pronouncements from the General Directorate of Taxes will be necessary to end this controversy.


* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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