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New decisions of the Arbitration Board
Friday, 5 de February de 2016

The Economic Agreement Arbitration Board, in its decisions of the 1 December, found that the retirement benefits received by a non-resident should be deemed to have been obtained in the Basque Country, when those benefits are from employment mainly taking place in that territory, for the purposes of attributing to one or other authority the competence to apply the system for the optional levying of income tax envisaged for the tax payers residents in the Member States of the European Union in the Non-Resident Income Tax. It thus deems to be applicable an identical criterion to the one subsequently incorporated in Article 22 of the Economic Agreement after the amendment introduced by Act 7/2014, of 21 April.

On the other hand, in its decision of the 2 December, the arbitration board precisely defined the scope of application of the tax management powers to be exercised by each authority. It found that the central government was not empowered to determine, based on the competences of that nature, the volume of operations of an entity subject to the inspection jurisdiction of the other authority in dispute, in this case that of Gipuzkoa, by reaffirming two basic principles already applied in early decisions: that there is solely one authority with inspection jurisdiction and that the volume and proportion of taxation to each authority may only be determined by the authority which holds that jurisdiction.

Finally, the Supreme Court, in its ruling of 7 December, has upheld the decision of the Arbitration Board 4/2014, of 13 April, which found applicable the third rule of Article 27.1 of the Economic Agreement, which attributes the exclusive competence to the authority of the domicile for tax purposes when the volume of operations of the entity does not exceed the amount of EUR seven million (six million in the wording in force as of the date applicable to the case). It dismissed an alleged unjust enrichment argued by the Spanish central authorities and found in the Second of its Legal Grounds that “in the context of the distribution of tax power between the State and the Basque provinces, analysing which authority benefits for that distribution regarding a specific operation and which would be disadvantaged is not an appropriate criterion for assessment. The Economic Agreement, as is the case of any pact, is an agreement, with cessions and trade-offs, that seek the overall balance, even if that is not achieved in a specific situation“.

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