Possible new avenue for tax recovery

This case begins with a situation in which the taxpayer is faced with a firm act, that is to say, an act not appealed within the deadline, but which, understanding that there was a manifest violation of the law, he requested the initiation of the extraordinary revocation procedure for the elimination of the aforementioned act.

As this procedure can only be initiated ex officio, the Administration rejected the requests for the initiation of the procedure presented by the interested parties, arguing its exclusive power without even evaluating the merits of the case and, thus, being able to conclude whether or not it was appropriate to initiate the procedure, but is the Administration absolutely free to deny this means of review?

Precisely the answer to this question is what the SC resolves in this ruling. This is a case in which several plots located in Bétera (Valencia) were sold in 2013 and 2014 with a transfer value notoriously lower than the acquisition value, according to the public deeds. In accordance with the well-known judgment of the Constitutional Court (TC) 59/2017, the taxpayer urged the initiation of a revocation procedure against the liquidations of the capital gains resulting from such transfers, which had become final for not having been appealed in time, alleging the inappropriateness of the same "insofar as they subject to taxation inexpressive situations of economic capacity", requesting the refund of the amounts paid.

However, the Administration, under the argument that the initiation of said procedure corresponds exclusively to the Administration, rejected the request for revocation, without entering into an assessment of the merits of the matter, which was appealed by the taxpayers.

The SC fully upholds the taxpayer's claims, understanding that the Administration has the obligation to initiate, process and resolve the revocation promoted by the interested party, since, otherwise, it would be sufficient for the Administration to refuse to initiate a revocation procedure, in which a taxpayer requests the refund of an undue payment, to avoid recognizing the same. In addition, this resolution can be appealed by the interested party in court, thus guaranteeing the constitutional principle of effective judicial protection.

Another issue is the conclusion reached as to when a "manifest" violation of the law is considered to have occurred, which is one of the circumstances that enables the revocation procedure to be initiated. In this sense, the SC considers that the acts of application of a rule that is declared unconstitutional, as occurs with the liquidations of the capital gains tax in transactions in which the transfer price is lower than the acquisition price, can configure a case of manifest infringement of the law and come into play the revocation of such act, even if it has become final.

However, it is necessary that the infringement be "manifest", understanding that this takes place, in the words of the SC, when it is "ostentatious, obvious, evident, clear, indisputable, which does not require any reasoning, but the simple exposition of the corresponding legal precept and of the act of the Administration in question".

Surprisingly, the SC understands that, as the capital gain and its regulation has been characterized by a great legal uncertainty until the judgment of the TC 59/2017, there being unequal judicial pronouncements even after it, there was at the time of the facts and the contested judgment a situation of uncertainty and normative obscurity, there being legal and judicial responses not only different, but even contradictory. Based on this, the SC concludes that the infringement does not meet the requirements to be considered as "manifest", so it cannot be included in the case that qualifies for the revocation procedure and, therefore, the refund of the amounts paid for the capital gains tax assessments is not applicable.

In any case, although the "saving" interpretation of the capital gains tax is, to say the least, controversial, it is important not to divert attention from the importance of the criterion established by the SC with respect to the revocation procedure, since it obliges the Administration to initiate, process and resolve the revocation promoted by the taxpayers, regardless of the fact that it can only be initiated ex officio, and the resolution can be appealed in court.

This criterion has a great applicability in practice, since it is applicable to all final acts that have not prescribed, highlighting currently, for example, all those penalties imposed by the Tax Administration in relation to the non-filing, or incorrect filing, of Form 720, regardless of whether they have become final.

Article published in El Economista