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General anti-abuse clause in spanish tax legislation: Proposals for increased legal certainty

Anti-abuse clauses are the mechanism typically used by different jurisdictions to avoid “abuse of tax rules” in a business environment characterised by the growing numbers of cross-border transactions taking place. Clauses of this kind are gaining increasing importance internationally, triggering their implementation by countries which have traditionally been reluctant to impose them, their recasting by other countries, the issue by supra-national organisations such as the European Commission of recommendations for their adaption, and their interpretation by tax authorities in highly expansive terms.

This rapid change of paradigm in the area of international taxation, spearheaded by the OECD and the G20 in its so-called Action Plan on Base Erosion and Profit Shifting (BEPS), and at domestic level, the reform of the General Tax Law which is currently in the process of approval by the Spanish parliament, are two circumstances in the light of which the Fundación Impuestos y Competitividad has decided to bring to the table this reflection on general anti-abuse clauses.

We should recall that one of the Ten Proposals for improved legal certainty within the context of the reform of the Spanish tax system, presented by the Fundación Impuestos y Competitividad during 2014, was “To clearly and specifically regulate the anti-abuse measures of domestic tax legislation, avoiding the application of legal institutions unrelated to tax law and ambiguous measures which may give rise to litigation.”.

The association implicit in this proposal between anti-abuse clauses and legal certainty is clear, with the increasing importance of general anti-circumvention clauses having an undeniable impact on legal certainty in the area of taxation, given the intensive use made of undefined legal concepts and the broad margin of interpretation which is left to the tax authorities and courts, when determining both the factual circumstances required and the resulting legal consequences.

These and other matters are analysed in the most recent project undertaken by the Fundación Impuestos y Competitividad, which has been led and coordinated by lawyers from the firm EY Abogados, and involved professionals from an ample cross-section of fields, in order to give broad and balanced coverage to the different issues raised by this question, and even a proposal for possible improvements to the system currently in force. It is as a result of this project that the Fundación has published the book entitled “Cláusula general antiabuso tributaria en España: propuestas para una mayor seguridad jurídica” (General anti-abuse clause in Spanish tax legislation: proposals for increased legal certainty).

The analysis contained in this work focuses especially, as is logical, on the amendments in this area proposed by the bill for the reform of the General Tax Law, and in particular, on the possibility of penalties being imposed in cases of conflict in the application of tax rules. This marks a change from the current regime under which penalisation was not possible.

The Board of Trustees of the Fundación is confident that this work will contribute to the debate on the best solutions for the use of anti-abuse clauses in our tax system. It is clear that a review is required of the use made of these clauses, and that there is some shoring-up to be done, in order to adapt to the new business environment, its complexities, and its international scope. Ideally, this should be done without adversely affecting legal certainty from the taxpayer’s perspective, any further than is strictly necessary in the fight against fraud.