Ease of proof and good administration

After lengthy tax proceedings that began with a VAT liability declaration for 2000 and 2001, the Supreme Court has found in favour of the person, different from the taxpayer, that was found liable for its payment (responsable) and instructed the tax authority to reinstate the proceedings, correct its error and make the tax file available to evidence that there was no VAT owed in the case in question.

The issue at the heart of this debate was customs-related and essentially a question of fact: whether or not specific goods had left the Iberian Peninsula and arrived in the Canary Islands. The difficulty in gathering evidence two decades later of facts that ultimately relate to the activity of a third party – the taxpayer – is surely not lost on anyone.

Of greater concern however is the tax authority’s failure to apply the fundamental principles of good administration and ease of proof.

The VAT collector tried to obtain documentation (mainly the SAD and other customs declarations) from the relevant authorities that would allow it to evidence that it did not owe any VAT. These attempts were unsuccessful, in some cases because the duty of confidentiality prevented the public authority from complying with its request; in others, because after almost two decades, the public authority simply no longer had the documents. The tax authority issued a decision (acuerdo de derivación de responsabilidad) transferring liability from the VAT payer to the third party (responsable) on the basis that – you guessed it – it had not provided new documentation evidencing that no VAT was owed.

It is a pity that, far from being anecdotal, this situation may prove to be all too common.