Constitutional Court strikes down Spain’s 2012 tax amnesty

On 8 June 2017 the plenary of Spain’s Constitutional Court declared unconstitutional and void the first additional provision of Royal Decree-Law 12/2012 of 30 March, the rule that created the “special tax declaration” and became known as the tax amnesty. The ruling upholds the challenge brought in 2012 by deputies of the Socialist group, which took almost five years to be decided.

What the amnesty allowed

The special tax declaration let anyone holding assets or rights that did not match income declared for personal income tax, corporate tax or non-resident income tax regularise them by paying 10% of their amount or acquisition value, with no interest, surcharges or penalties. In general it covered what was held on 31 December 2010; the deadline to file and pay ended on 30 November 2012, and taxes and periods already under a notified inspection or investigation were left out. What was declared counted as declared income. Royal Decree-Law 19/2012 of 25 May later adjusted some aspects of the measure.

The government approved it by decree-law. The Constitution reserves that instrument for cases of extraordinary and urgent need and forbids it from affecting the duties of citizens set out in its Title I, among them the duty to contribute to public spending.

What the ruling says

The Court holds that the measure affected the essence of the duty to contribute and so could not be approved by decree-law: that is the reason for the nullity. It therefore sees no need to examine whether it also breached the principles of ability to pay, equality and progressivity, which the appellants also invoked.

According to the reports published that day, the Court was also critical of the content of the measure: it said that the need to raise revenue in the middle of a crisis was not enough to justify it, and that it put those who had failed to comply in a better position than those who paid on time.

What happens to those who used it, and what stays the same

The ruling itself limits its effects. Final tax situations arising under the rule cannot be reviewed, as the principle of legal certainty requires. In practice, someone who regularised in 2012 and whose situation is already final does not have to pay again because of this ruling, and the press agreed that it has no financial effect on those regularisations. The text speaks only of final situations. It does not spell out what happens to those that are not, for example if proceedings are still open, so each case has to be looked at separately.

The ruling annuls only that provision and does not change the general rules. Anyone who discovers undeclared income today can regularise it with an amended return, paying the tax with surcharges that rise with the delay and without a penalty, as long as the tax authority’s right to assess has not lapsed. The general limitation period is four years. For anyone who never used the amnesty, the ruling creates no new obligation.

Those who used the amnesty in 2012 should keep the special tax declaration they filed and the proof of payment: they show that their assets appear as declared income and what situation was consolidated. Ask your tax adviser how it applies to your case.

A rule can fall because of the way it was approved, but legal certainty protects what had already been consolidated.