Aberdeen procedure in Spain
The present e-alert aims at summarizing the procedure that should be followed in order to potentially obtain a refund of withholding taxes suffered on dividend distributions from a Spanish company to a Luxembourg investment fund. Indeed, based on the current administrative practice, the Tax Authorities are in most of the cases rejecting the claims based on a breach of EU law, which makes it necessary to be aware of the procedure that each fund will have go through.
Once the initial refund claims have been filed in Spain with the Spanish Tax Authorities (STA), the subsequent stages/steps are:
1. Administrative level (STA)
a. Information requirements: It is possible to receive electronic notifications of information requirements issued by the STA regarding the claims filed in Spain. It is very important to answer all these notifications of information requirements in order to avoid that the claims are deemed null/invalid and thus barred at court level. Please be aware that the information requirements may also be issued afterwards in case the court refers the matters back to the STA.
b. Preliminary rejections/settlement proposals of the refund claim by the Tax Authorities: These grant a 10 day period to file comments (allegations) before the same body that issued the rejection. These allegations are normally useless, even more in a procedure where the reclaim is based on a breach of EU, which for the Tax Authorities to accept ultimately requires a change in Spanish Law or a decision of the European Court of Justice. Accordingly, KPMG's day-to-day practice has been not to file these allegations and wait for the final rejection to be issued.
c. Final rejection of the refund claim: Against the final rejection issued by the STA the taxpayer can file a claim either before the STA ("recurso de reposición") or directly an appeal before the Spanish Administrative Courts.
2. Administrative Court Claim
The period for filing this claim is of one month as of the date following that on which the rejection is received. This period is common to the possible procedures through which the appeal can be continued and which depend on the specific circumstances of each case:
a. Abbreviated procedure - This procedure is reserved for claims amounting to figures under € 6,000 (per quarterly return claimed): In this procedure the claim is initiated through a single document where the parties are identified, proof of representation is provided and the complete arguments of the claim are presented. The claim is presented before the STA which forward it to the competent Administrative Court.
The main difference between this procedure and the ordinary one is that the Court (acting through only one of its members) shall issue its resolution in a maximum period of 6 months as of the date on which the claim is filed. If the resolution is not issued within this period, the claim can be deemed to have been tacitly rejected.
The claimant can either consider the claim rejected or wait for an express resolution to be issued by the Regional Administrative Court ("Tribunal Economico-Administrativo Regional").
b. Ordinary procedure - In principle this procedure applies to all other cases: In case of tax claims for amounts in excess of € 150,000 per quarter the claim can be filed before the Regional Administrative Court and then appealed with the Central Administrative Court, or filed directly with the Central Administrative Court, including the same information and annexing the same documentation as described for the Abbreviated procedure. For claims between € 6,000 and € 150,000 the claim should be filed with the Regional Administrative Court and there is no possibility of a further appeal before the Central Administrative Court (any claim should then be before the Ordinary Courts).
Under this procedure the taxpayer is allowed to review the complete file kept by the STA unless he/she waives such right.
As to timing, and although the Court is obliged to issue an express resolution in all cases, if no such resolution has been issued one year after the claim is filed, the claim can be considered tacitly rejected and can be appealed before the next step in a six month period.
On the other hand, if the claimant waits for an express resolution, the period for appeal would be of two months after the notification of the resolution to the claimant or its representative.
Please note that in general terms each quarterly refund claim is considered as a separate claim and therefore the above amounts are always calculated in respect of quarterly claims filed.
c. Resolutions issued by the Spanish Administrative Regional Tax Court: The Spanish Administrative Regional Tax Court has issued resolutions that partially accept the arguments put forward by the claimants.
In general terms, the Spanish Regional Administrative Court is agreeing to refer back the matter to the STA in order to verify i) the validity of the documentation provided (i.e. tax residence certificates previously filed by the claimant through a cross-checking with the original ones) and ii) the fact that the claiming investment fund is comparable to a Spanish investment fund.
At this point the STA are now issuing communications informing that they are going to start up the reviewing process and that for such purposes they require further documentation, among other CSSF certificate.
Once the fulfilment of the requirements is verified, then the repayment of the withholding tax made to the Treasury, together with the relevant late payment interest should be in principle agreed by the STA.
For further information please contact us.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.