Spain: Is the Value Added Tax on Electric Energy Production (el Impuesto sobre el Valor de la Producción de Energía Eléctrica-IVPEE) contrary to European Union Law?

The High Court of Justice of the Community of Valencia, by Order dated February 22, 2019, referred a question to the TJEU for a preliminary ruling in order to resolve four questions regarding the conformity of the IVPEE with Union law.

The first of these questions refers to the conformity of the IVPEE with Article 1.2 of Directive 2008/118/EC, insofar as that provision only allows indirect taxation on electricity when it pursues a specific purpose. It is argued in the order that, despite the regulation of the IVPEE as a direct tax, its nature and essential elements are typical of an indirect tax. And that, despite having a nominal environmental purpose, it is essentially a tax with no specific purpose, which is collected, not extra-fiscal.

The three remaining questions concern the conformity of the IVPEE with the principle of free competition and the promotion of energy from renewable sources, given that it only taxes energy produced in the Spanish market, in violation of free competition, and taxes energy from renewable and conventional sources alike.

If it were admitted that the IVPEE is a purely fiscal tax, i.e., without a clear specific purpose and with a merely collecting purpose, and the environmental nature of the tax is questioned, it could be in breach of Article 31.1 of the Spanish Constitution, considering that the IVPEE is taxing a taxable event identical to the Tax on Economic Activities (IAE). and the Corporate Tax (IS).

An analogous procedure was developed with the case known as céntimo sanitario, whose favourable resolution allowed its return to a multitude of affected taxpayers.

In the absence of a pronouncement by the TJUE on the conformity of the IVPEE to Union law, it is advisable to request the rectification of self-assessments and the return of undue income from payments made under this tax, in order to avoid the statute of limitations. After the entry into force of the Law on the Legal Regime of the Public Sector -Law 40/2015, of October 1, 2011- those who have not formally requested the return of the amounts already self-assessed will be deprived of their right to obtain a refund of the amounts paid.

In fact, on November 20th and 30th, the right to request the refund of the IVPEE payment as an advanced payment for 2016 or end payment for 2015 respectively, expired, for 4 years have passed since the deadline for the presentation of the self-settlements through tax form 583.

With the presentation of the application for the rectification of the self-settlement and the pertinent refund of undue income, the statute of limitations is avoided, and it will be necessary to appeal before the Economic-Administrative Courts and even to file a contentious-administrative appeal, in case the different administrative bodies reject the claim.

Lozano Schindhelm has a lot of experience in this type of claims, so we recommend that energy producers who have paid the IVPEE to urge the rectification and request the return of undue tax payments, in order to benefit from an eventual positive pronouncement of the TJUE regarding these tax periods.

The ECJ has announced the publication of the judgment in these proceedings for 3 March 2021.

This article was updated on 11.02.2021.

Autor: Fernando Lozano
Autor: Claudia Cascant
Autor: Andrea Quiles