Taxpayers should not be subject to unnecessary barriers and obstacles

Second chance against the Inland Revenue

23 / Jan

It is not uncommon for a taxpayer (or his advisor) to realise that for some reason he has overpaid the Inland Revenue (Agencia Estatal de Administración Tributaria, AEAT). From that moment on, the Law allows the taxpayer to initiate a procedure to claim a refund under art. 221 of the General Tax Law.

Anyone who knows the Inland Revenue knows that it tends to put up all kinds of obstacles in order not to return what has been unduly paid. Over the years, case law has been polishing all these seemingly insurmountable obstacles.

Starting with the first of the obstacles, the AEAT could reject the application on the grounds that it was considered to be beyond the statue of limitations. In other words, if the taxpayer realised the error more than four years after the payment of the tax, the AEAT would reject the refund application.

For example, if the 2009 personal income tax payment had been made erroneously in June 2010 and you were aware of the error in December 2016, the AEAT considered the right to request a refund of the undue income in June 2014 to be time-barred because more than 4 years had elapsed since the payment of the tax. The AEAT, indicating that, if there is a “final and consented” assessment, considered that this could only be challenged by filing a special review procedure.

However, the Supreme Court, in a ruling of February 2021, has come to put order in defence of the taxpayer, indicating that the right to request a refund arises, not when the payment is made, but when the taxpayer becomes aware that it was undue, as at that moment the right to claim is born for him.

The Supreme Court considers that there is no “final and consented” assessment in the proper sense when it is not preceded by any kind of factual verification by the administration, as is the case with self-assessments. In short, the Supreme Court reproaches the administration in these cases for refusing to study the merits of the case.

In the same ruling, the Supreme Court affirms that the taxpayer may make a second request for a refund of undue income and obtain a substantive response from the Administration, which is obliged to do so. This request must be made within the period established in Article 66.c) of the LGT and must be based on grounds, causes, facts or circumstances different from those set out in the first request.

It is important to reiterate that the Supreme Court has overcome these three important pitfalls:

  • The limitation period for requesting a refund of the undue income is from the moment the taxpayer becomes aware of the error and not from the payment of the tax.
  • A self-assessment is not time-barred as long as the administration does not enter into the merits of the case, i.e. as long as it does not make a reasoned legal settlement.

If the two previous sections are fulfilled, the taxpayer may attempt a second shot and repeat the application for a refund of undue payment, provided that it is based on grounds, facts or circumstances different from those used in the first application.

From this, it is clear that as a taxpayer you have the right to request a refund of undue payments from the AEAT under the fulfilment of certain conditions, without unnecessary obstacles.

Mª Dolores García Santos