The administrative doctrine of TEAC understands that the application of the compensation of negative tax bases in the settlement of IS constitutes a tax option (among others, TEAC 4-2-17, EDD 31513). The Courts of Justice are now ruling both in favour of and against the position held by TEAC, without the judgments being appealed to date by higher-ranking courts.
That is the case with the judgments of TSJ Madrid 3-2-20, which concludes that compensation cannot be regarded as a tax option, and the judgment of TSJ Burgos 16-12-19 EDJ 2019/835466, which concludes in the same way as TEAC.
Let us briefly recall the arguments of THEAC:
The question is whether, as regards the compensation of negative tax bases, it can be said that we are faced with an option or not, under the terms of THE LGT art.119.3.
The term“option”“according to the Dictionary of the Spanish Language of the SAR is understood as “Freedom or the right to choose” or “Right to choose between two or more things, based on legal precept or legal business”, and by the Dictionary of Legal Spanish of the SAR as “Right to choose between two or more alternatives”. In turn, the Dictionary of the Spanish Language of the SAR defines “opt” as “choosing something among several things”.
The Court points out that whether or not the Law allows the taxpayer to choose between offsetting the negative tax bases and, in the first case, the amount to be compensated within the possible limits, falls fully within the concept of “option” defined above. Thus, the compensation of negative tax bases from previous years is an exception to the principle of independence of exercises which is practiced by reducing the taxable amount of subsequent years, that is, operating on the basis.
The Act recognizes taxable persons right to compensate negative tax bases from previous years; the exercise of that right is optional and not imperative, and it must be the taxable person who decides, within the legal limits established for that purpose, whether or not to exercise his right to compensation, as well as the amount thereof.
It is also an option that is exercised “with the filing of a declaration”, which is the declaration of corporation tax, so the choice in respect of compensation or not and, if so, the amount thereof, should be considered a tax option exercised by filing a declaration and, consequently, that it meets all the conditions for the LGT art.119.3 to apply to it.
Thus, in the event that the taxpayer decides do not compensate any amount or offset a amount less than the compensable maximum limit in the financial year, it is clear that the taxpayer chose not to take advantage in whole or in part of the compensable negative tax bases, which will have a certain impact on the amount that ultimately results in entering or returning in their self-liquidation. So things, in the view of TEAC, the taxable person who, as a result of his self-liability, may not subsequently, and outside the period of self-liability on a voluntary basis, be it a means of rectification of self-liability or within a verification procedure to modify the option already exercised within the meaning of a verification procedure. resulting in you entering a lower amount or returning a higher amount.