Royal Decree-Law, which, among other measures, limited tax compensation for Corporate Tax losses, is called into question for using this legislative instrument to modify core aspects of the tax.
Professor of Financial and Tax Law of the UIC Barcelona Faculty of Law and director of the Family Business Chair, Jordi de Juan, has championed the battle against Royal Decree-Law 3/2016, and has made the National Court raise the issue of unconstitutionality before the Constitutional Court, questioning the use of the Royal Decree-Law instrument to legislate on a core element of Corporate Tax.
One of the measures introduced by the Royal Decree-Law, the limitation of the tax compensation for losses, led to billions of euros in collection in favour of the Public Finance. Now, should the Constitutional Court endorse the position outlined by Dr De Juan, which already occurred with Royal Decree-Law 2/2016, a serious blow would be dealt to state coffers and entail millions in returns.
Raising the question of unconstitutionality is the outcome of the legal research conducted by Dr De Juan. The articles “La impermeabilización del Impuesto sobre Sociedades al Decreto-Ley: la dudosa constitucionalidad del Real Decreto-Ley 3/2016, de 2 de diciembre” [The impermeability of corporate income tax in the Decree-Law: the dubious constitutionality of Royal Decree-Law 3/2016 of 2 December 2016], and “La controvertida utilización del decreto ley en materia tributaria” [The controversial use of the Decree-Law in tax matters], published in Nueva Fiscalidad and Revista Española de Derecho Constitucional respectively, and written by Dr De Juan, have served as a dogmatic and scientific body on which to legally base the question of unconstitutionality.
In this regard, in the article published in the journal Nueva Fiscalidad, Dr De Juan concluded that “the regulation of the essential elements of corporation tax is a material sphere impenetrable by the Decree-Law.”
Currently, it is all in the hands of the Constitutional Court, which will have to determine whether the regulation violates the material limits of the Royal Decree-Law and, if so, violates the principles of tax justice. In any case, if the approach of Dr De Juan is accepted, the declaration of unconstitutionality would have a great impact at the national level.
