DOCTRINE OF THE SUPREME COURT - ILLEGALITY OF THE REGIONAL TAX ON HYDROCARBONS

The recent ruling by the Court of Justice of the European Union (CJEU) and subsequent decisions of the Spanish Supreme Court have significant implications for the regional tax on hydrocarbons in Spain, particularly regarding its alignment with European Union law. Here's a summary of the key points and considerations from the decisions:

Key Doctrine and Entitlements:

• Right to Refund:

• Taxpayers who have borne the economic burden of the regional hydrocarbons tax can claim a refund for payments that are deemed contrary to EU law.

• This right to refund is valid unless the taxpayer has transferred the tax burden through the price to buyers, which would neutralize the economic impact on the taxpayer.

• Proof of Transfer:

• It is not the responsibility of the taxpayer seeking a refund to prove that they did not transfer the tax burden to their customers.

• The tax administration cannot deny a refund on the grounds that the taxpayer has not shown evidence that the tax burden was not passed on to third parties.

• Final Consumers' Rights:

• Final consumers who paid a higher price due to the inclusion of the regional tax are not entitled to directly claim refunds as undue tax income.

• However, they may seek compensation through civil claims for unjust enrichment against those who transferred the tax burden to them or through mechanisms for state liability for EU law breaches.

• Competence for Refund Claims:

  • Requests for refunds related to incorrect self-assessments and undue payments fall under the jurisdiction of the State Tax Administration Agency (Agencia Estatal de Administración Tributaria) or respective Provincial Treasury bodies.

Considerations on Regional Implementation:

• Variation Among Autonomous Communities:

  • Not all Autonomous Communities in Spain implemented the regional section of the hydrocarbons tax uniformly between January 1, 2013, and December 31, 2018. Some regions chose not to exercise their regulatory authority over the tax, or did so with varying rates, timelines, and product applications.

  • This variation impacted the eligibility and amounts of refunds, particularly for professional diesel users who may have received partial refunds during this period.

Unresolved Issues:

• Statute of Limitations:

• The Supreme Court's decision on September 20, 2024, did not address whether the tax periods affected by the annulment are subject to specific statutes of limitations.

• Impact of Tax Transfer:

• It also did not determine the implications of tax transfer to third parties in terms of neutralizing the economic effects on the taxpayer, leaving some aspects of how refunds are calculated open for interpretation.

Implications for Affected Parties:

The rulings clarify the rights of taxpayers to seek refunds but impose limitations based on whether the tax burden was passed along to others. Taxpayers must navigate these conditions and timelines carefully, especially given the one-year window to pursue state liability claims following the CJEU ruling. The regional disparities in how the tax was applied also mean that the impact and processes for seeking refunds may vary by location.