The Tax Agency (AEAT) is at the forefront of the digitalization of the Spanish Administration. From 2019, the nearly 19 million IRPF taxpayers will no longer be able to file their tax returns on paper. This obligation, which is in line with the current debate on the difficulty for older generations to access banking services, also has consequences for other taxpayer rights.

At the same time, the AEAT has been using Big Data tools for some time now to monitor large estates. These mechanisms make use of algorithms that are also used in its plan of visits to SMEs and self-employed to determine that a taxpayer presents billing or credit card usage data discordant with what it believes is or should be the average for the sector, which leads it to presume that there may be fraud, a practice that the Supreme Court has called into question in the ruling that annulled the surprise registrations.

The disturbing possibilities of the use of algorithms in the tax field that some experts are beginning to study can have a great impact and sometimes go unnoticed. This is the case of the Personal Income Tax Return Model and its implementation through Renta Web, which has prevented deductions from being applied, as far as is known, in the 2019 and 2020 Income Tax Campaigns. That is to say, an algorithm does not allow applying deductions that the legal framework makes possible.

The Spanish Association of Tax Advisors (Aedaf) has appealed the Personal Income Tax Models of 2019 and 2020 for restricting this right, an appeal on which the National Court is going to pronounce shortly. This, on the practice itself of preventing the deduction. On this deduction in question, which the AEAT questions, there has been a lawsuit in which the Supreme Court has ruled in favor of the taxpayer.

While waiting for the National Court to say whether or not this use of the algorithm fits or not, the State Attorney’s Office, which must rule in favor of the taxpayer after the Supreme Court’s ruling and as such, warns in its brief, to which Vozpópuli has had access, that this decision of theirs now favorable to the citizen will not affect other similar cases. That is to say, he warns that he believes that what a tax model says is legitimate, even if it uses algorithms that prevent deductions from being applied.

Specifically, the tax return model has an algorithm in it which means that, when a certain box is checked, an option that does exist in the law is disabled. It is about the sections to determine the yield of the real estate capital on page 7, in the case that the acquisition of the property object of assignment in lease or usufruct had been made by the taxpayer in a lucrative way. In this case, the calculation of the depreciation of the property must be started by choosing box 0119, and not box 0118 foreseen for cases of acquisition. Subsequently, the taxpayer is presented with boxes 0120 to 0129, in which he must report various items. When calculating the depreciation of the property, in the event that the property has been acquired by the taxpayer for profit, the computer application of the model disables the “acquisition amount” fixed in box 0126 to be taken into account as part of the base.

In the event that the taxpayer checks box 0119, the computer algorithms cancel the possibility of applying the amounts included in box 0126 as the basis for the depreciation of the property, allowing the calculation to be carried out exclusively on the basis of the amount included in box 0127, relating to the expenses and taxes inherent to the acquisition, or on the basis of the cadastral value of the building, included in box 0124.

In this way, by means of regulations, one of the two alternatives provided for in the law, which serve as the “value” or basis for the depreciation of a property, is being disqualified. Specifically, the possibility of applying the 3% percentage on its “acquisition amount” is annulled. An example would be that a property with a market value of 300,000 euros could apply a tax deductible amount of 150 euros by the only way that the AEAT has offered, for 4,500 euros of the second possibility that the legal framework allowed and that the Treasury prevented.

With this way of acting, the Regulation is going beyond the law, interpreting it to the detriment of the taxpayer by considering that when the law speaks of “acquisition cost” it refers, in the acquisitions of real estate for profit, only to the expenses and taxes inherent to the acquisition -of the box 0127-, but not to the “value” of the property, of which the mentioned precept itself also speaks”, they point out from Aedaf.

It has not been informed

Once the Supreme Court has ruled in favor of the taxpayer, the Association has contacted the AEAT, which has moved that it will allow taxpayers to rectify their self-assessments of 2019 and 2020. Possibility that has not been publicized and that is not known by most of the affected taxpayers. Unlike other cases in which refund procedures are arbitrated. And waiting for this to be corrected in the Model of the 2021 Income Tax Campaign, which starts next April 6.

AEAT sources state that the Model prevented this possibility because a report of the General Tax Directorate so advised. A report of this type does not have legal rank.

Aedaf already won in the National Court a similar case against the Ministerial Order that approved the model of IRPF declaration corresponding to the financial year 2017 and annulled it in relation to the Reserve for Investments in the Canary Islands, since it shortened the period in which it can be enjoyed.

Source : Vozpopuli