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NEWS AND AGENDA

Constitutional Court confirms constitutionality of tax on electricity production and Supreme Court interprets ROVER doctrine

In a ruling dated 17 January the Constitutional Court has confirmed the legality of Provincial Regulation 24/2014 of 9 July of the General Assembly of Álava on the tax on electricity production, with effects dating back to 1 January 2013, the date of the entry into force of the tax in the body of law of Spain.

The Court argues that the said provincial regulation is a response to the need for adaptation that results from Additional Provision Two of the Economic Agreement, with the time required for that adaptation to be put into effect by mutual accord between the central government and the regional autonomous community in order to include in it new taxes created by the central government through the relevant arrangements.

What the court considered a true case of back-dating is therefore only a consequence with a view to permitting the effective incorporation of the tax on the value of electricity production into provincial tax systems, determining the date of effect of the arrangements for the tax. It is not therefore, according to the Court, a problem of back-dating the tax on the value of electricity production, a tax that was already in existence, having been created by Act 15/2012 of the central government, but rather of back-dating the effects of the arrangements made for it to be integrated into the tax system of each respective historical territory and make it possible for the provincial councils to levy, manage, settle, collect and inspect it.

For its part the Supreme Court ruled on 31 January last to apply its doctrine as ruled in the ROVER case to a case in which the Board of Arbitration of the Economic Accord of Navarre had upheld the criteria applied by the Provincial Treasury Department.

In line with its previous rulings, the Court states that even though the corporate headquarters of the company is in Navarre and the industrial workshop where the personnel and materials used to direct the business are also located there, the fact that the operations of the company to acquire pigs (in the common territory or within the province), prepare them and transport to the place designated by the purchaser (be it in common territory, within the province or outside Spain) cannot be considered as irrelevant or merely ancillary.

These operations – other than the management functions centralised in the province – clearly also generate added value, as the operations performed elsewhere (be it in Navarre or in common territory) include such important tasks as receipt of goods, loading, unloading, storage, transportation from and to the relevant location and delivery to designated abattoirs can certainly not be classed as accessory or irrelevant.

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Final instalments of the series on the Economic Agreement

Issues 248, 249 and 250 of Forum Fiscal contain the last three of the fifteen instalments in which Javier Armentia Basterra has examined in depth the contents of the Economic Agreement, in terms of taxation, financial relations and the bodies envisaged for those relations. This completes exhaustive efforts to document and analyse our own particular system of fiscal and financial self-government, and provides scholars with an essential instrument for understanding and disseminating it.

Moreover, issue nº 2 for 2018 of the discussion papers of the RIFDE (Network of Researchers in Regional Financing and Financial Decentralisation in Spain) contains a study by J. Agustín Manzano Silva that analyses the consequences of the agreements reached concerning the tax quota for the Basque Country and the contribution of Navarre for the Regional Autonomous Communities that operate under the common framework.

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Seminar on the Economic Agreement in Europe on 25 March

On 25th March next the Centre for Documentation and Research on the Economic Agreement and the Provincial Treasuries, in cooperation with the Department of Contemporary History and the Department of Financial and Tax Law of the University of the Basque Country, is to hold a seminar under the title "Multi-tier fiscal governance in the European Union: the case of the Basque provincial treasuries".

The event will be opened by José María Iruarrizaga, Provincial Councillor for the Treasury in Bizkaia and Joseba Agirreazkuenaga, Professor of Contemporary History and director of the centre.

Addresses by various specialists will be followed by the presentation by the Association for the Promotion and Dissemination of the Economic Agreement of a new line of publications from Ad Concordiam, beginning with a study by Andoni Montes, a pre-doctoral researcher at the Complutense Institute for International Studies, under the title "Basque provincial autonomy and integration into Europe in the field of corporation tax".

The seminar will end with a debate among all the speakers.

Programme for the seminar

The series “All about The Economic Agreement” continues

Forum Fiscal continues its series on the Economic Agreement by Javier Armentia Basterra. Instalments XI and XII are included with Issues 246 and 247 of the journal. Iñaki Alonso Arce discusses the creation of new taxes by the Spanish parliament and the implications for the Basque provinces.

Issue 193 of the Revista Española de Derecho Administrativo (Spanish Journal of Administrative Law) includes a piece by José Damian Iranzo Cerezo, magistrate from the contentious-administrative division of the Basque High Court, on the consequences of the latest Constitutional Court judgements for the so-called "armour plating" of provincial legislation.

In the December issue of the journal Exparlamentarios, Juan José Laborda Martín, former speaker of the Senate, and Ignacio Zubiri Oria, Professor of Public Finance at the University of the Basque Country, discuss the significance of the Economic Agreement as a historical entitlement of the territories of Navarra and the Basque Country and analyse the quota system and its consequences.

Finally, Rafael Fernández Valverde, magistrate of Court Three of the Supreme Court, discusses the court's judgement of 5 September 2018, ruling that the provincial governments cannot be held liable for the recovery and return by affected companies, of aid awarded in the form of tax benefits, and subsequently ruled to be unlawful state aid by the European Commission. This judgement confirms the decision of the Basque High Court, in its judgement of 22 November 2016.

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The series "All about The Economic Agreement" continues

Forum Fiscal continues its series on the Economic Agreement by Javier Armentia Basterra. Instalments XI and XII are included with Issues 246 and 247 of the journal. Iñaki Alonso Arce discusses the creation of new taxes by the Spanish parliament and the implications for the Basque provinces.

Issue 193 of the Revista Española de Derecho Administrativo (Spanish Journal of Administrative Law) includes a piece by José Damian Iranzo Cerezo, magistrate from the contentious-administrative division of the Basque High Court, on the consequences of the latest Constitutional Court judgements for the so-called "armour plating" of provincial legislation.

In the December issue of the journal Exparlamentarios, Juan José Laborda Martín, former speaker of the Senate, and Ignacio Zubiri Oria, Professor of Public Finance at the University of the Basque Country, discuss the significance of the Economic Agreement as a historical entitlement of the territories of Navarra and the Basque Country and analyse the quota system and its consequences.

Finally, Rafael Fernández Valverde, magistrate of Court Three of the Supreme Court, discusses the court's judgement of 5 September 2018, ruling that the provincial governments cannot be held liable for the recovery and return by affected companies, of aid awarded in the form of tax benefits, and subsequently ruled to be unlawful state aid by the European Commission. This judgement confirms the decision of the Basque High Court, in its judgement of 22 November 2016.

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New vacancy on the Economic Agreement's Arbitration Board

Isaac Merino Jara, Professor of Tax Law has presented his resignation as a member of the Arbitration Board of the Economic Agreement, on which he has sat for the last decade. The move follows his appointment to the position of Supreme Court magistrate (Court Three), on the recommendation of the General Council for the Judiciary—a post filled by distinguished lawyers and jurists. Prof. Merino's resignation once again leaves the Arbitration Board inoperative, at a time when it has a considerable number of cases awaiting resolution.

In recent judgements, the board has resolved a number of issues that have proved controversial in recent years, such as the reporting point for withholdings on earnings for work performed on board ships (Judgement 6/2018), treatment of advance payments for the purposes of determining the trading volume in Company Tax (Judgement 9/2018) and the determination of regulations applying to business restructuring operations involving organisations subject to the legislation of different administrations (Judgement 16/2018). It has also confirmed other rulings, such as the location for VAT purposes of fuel deliveries supplied via credit cards (Judgement 7/2018).

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Seminar on the Economic Agreement at the University of the Basque Country

On 21 and 29 November two seminars took place at the Centro Carlos de Santamaría venue in Donostia-San Sebastián under the leadership of professors Isaac Merino Jara and Juan Ignacio Ugartemendia Eceizabarrena which looked in depth at the points of connection envisaged in the Economic Agreement for the allocation of regulatory authority for the levying of taxes and tax inspections between the central government and the Basque provincial authorities. The speakers on the first morning were representatives of the various tax authorities in the Basque Country, while those at the rest of the seminars were academics from the University of the Basque Country and several other Spanish universities.

Programme of the seminars

Administrative doctrine

The Tax Coordination Body of the Basque Country has issued two consultations in which, on the one hand, it analysed the application of the tax benefits provided for in the common regional regulations on patronage in favour of a provincial cultural foundation, also qualified as a priority activity, and, on the other, it clarified the application of the First Transitional Provision of the Economic Agreement, after raising the threshold for taxation on volume of transactions to 10 million euros and its application to tax periods or settlement periods which have begun since the entry into force of Law 10/2017, notwithstanding the omission from that provision of any reference to Article 27 relating to the levying of VAT.

The Arbitration Board of the Economic Agreement has resolved four arbitration disputes through its Resolutions 1 to 4 of 2018. In the first of these (Resolution no. 1/2018), it confirmed its previous doctrine in relation to determining the dies a quo for calculating the statutory filing period in cases of discrepancies prior to the effective constitution of the Board, referring to the date of this constitution to do so. The second (Resolution no. 2/2018) denies the application of the Rover Doctrine to a case in which there is a transfer of goods not transformed by the transferor, referring to the place where the transport begins to determine the location of transactions. Resolution 3/2018 admits evidence to the contrary against the presumption provided for in the VAT legislation that a permanent establishment with a tax ID number assigned to it by the tax administration is a taxable person. Finally, Resolution no. 4/2018 understands the first delivery of property to be the delivery subsequent to entering into a contract for the "sale of a building under construction and assignment of development", while denying, at the same time, the appropriateness of the Board to analyse and pronounce itself in favour of the application of a criterion that equitably distributes the tax charged between conflicting administrations.

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Scientific doctrine

Forum Fiscal continues its series devoted to providing full explanations of the Basque Economic Agreement. This series is written by Javier Armentia Basterra, Head of the Regulatory Development Unit at the Provincial Council of Araba/Álava. Issues 242-245 of the journal contain chapters VII, VIII, IX and X, respectively. The first three of these chapters complete the analysis of the regulatory capabilities and the ability to apply various taxes, and the fourth covers management and procedural regulations.

On the subject of the agreements entered into by the Basque and Spanish authorities in 2017, issue nº 244 of Forum Fiscal features an article by Gemma Martínez Bárbara (Head of the Fiscal Policy Unit of the Provincial Council of Bizkaia) analysing the solution provided by the modification agreed on the point of connection for inheritance tax to the problems of breaches of the rule on freedom of movement of capital. Issue nº1 55 of the Basque taxation journal ZERGAK includes articles by José Rubí Cassinello (Technical Secretary General of the Revenue Department of Bizkaia) analysing the changes made to the Agreement by Act 10/2017 of 28 December, and on the contents of the May 2017 agreements on the settlement of quotas from 2011 to 2017 and the contents of the new Quota Act for the five-year period from 2017 to 2021.
Issue nº 244 of Forum Fiscal contains tywo articles on the resolutions of the Board of Arbitration for the Economic Agreement. The first is by Iñaki Alonso Arce (Deputy Head of Coordination and Technical Assistance at the Provincial Revenue Department of Bizkaia), dealing with the levying of certain withholdings on earned income by a body answerable to the institutional administration of the central government. The second is by Idoia Zapirain Torrecilla (a Technical Officer at the Revenue Department of the Provincial Council of Gipuzkoa); it analyses the powers of the Board of Arbitration in cases where to settle a dispute a prior legal ruling on the operation in question is needed (in this case whether the operation is subject to VAT).
Finally, two further articles are worthy of mention: the first, by Iñigo España Ariza, also appears in issue nº 245 of Forum Fiscal, and takes an in-depth look at the implementation in the regulations for Bizkaia of the anti-BEPS measures drawn up by the OECD. The seconds is by Benjamí Anglés Juanpere, and analyses the nature and development over time of transfers to municipal bodies in the Basque provinces.

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A court in Madrid orders the publication of the agreement subscribed by the central government and the Basque government in May 2017

Madrid's Central Court for Administrative Proceedings no. 7 issued a ruling on 12 July 2018 ordering Spain's Ministry of the Treasury and Public Administrations to disclose the agreement signed on 4 May 2017 between the Government of Spain and the Basque Autonomous Community on the settlement of the tax contribution in previous years and the setting of the five-year contribution through to 2021, considering that the access to information should be understood in a broad sense and that any restrictions on it should be of an exceptional nature. A researcher submitted a request to the Ministry for the purpose of conducting a study on the financing of the autonomous communities and the system of tax contributions. The Ministry rejected the request, whereby the researcher had no other choice but to appeal to the Transparency and Good Governance Board (CTBG in its Spanish initialism), which ruled in the researcher's favour in a decision issued on 15 September 2017 that was, in turn, contested by the Ministry.

The Court argues that "in any case, there is clearly a greater public interest in obtaining that information, which should prevail over the hypothetical lack of virtuality of the agreement or the need for other proceedings or actions for the effective enshrinement of the agreement. Pursuant to the above, and assuming the "strict, when not restrictive" interpretation that is to be made both of the restrictions on access to information and of the reasons for the refusal to process the request, the present appeal is therefore upheld".
In turn, the Supreme Court, in a judgement delivered on 3 July 2018, ratifies the Basque region's right to establish assumptions of responsibility other than those provided for in Spain's General Law on Taxation [Ley General Tributaria], confirming the doctrine issued by the Higher Court of Justice of the Basque Country through its lower court ruling. The precept questioned declares the joint responsibility of effective or legal directors, partners with a direct or indirect holding of 20 percent of capital, joint owners or investors, and their family members up to the second degree, of those undertakings that have practiced withholdings that remain pending payment, for the amounts of those withholdings they have deducted in their self-assessed tax returns for personal income tax.

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