Tax and Customs Tribunal (TTA) qualifies loss as “unnecessary expense” due to lack of economic foundation and rejects return of PPUA
Through a judgment of June 20, 2018, the Second TTA of Santiago rejected the tax claim filed by a public limited company against the resolution of the SII that denied its request for the return of a provisional payment for absorbed profits (PPUA).
The claimant, by virtue of the capitalization of a debt that made her the controlling entity of the former debtor and subsequent termination of the business of said subsidiary, generated a considerable loss that led her to request a return from PPUA.
The TTA, considering the arguments of the SII, considered that the “losses”, like any other disbursement of the year, should meet the general requirements of article 31 LIR to reduce the taxable income, consequently, there should be a ” necessary expense to produce income ”. In the case in question, the loans that gave rise to the debt, its subsequent capitalization and the reporting of the turnaround term in the course of two months from the latter, in the opinion of the SII and the TTA, would constitute a series of acts that lacked of economic reasonableness and, consequently, since it was not a necessary expense to produce income, it was not possible to deduct the loss, much less resolve the PPUA request favorably.
The Santiago Court of Appeals confirmed the judgment of first instance in a ruling of April 17, 2019, and the Supreme Court did not know the merits of the matter, because the appellant withdrew from the cassation appeal filed before his hearing.
In this case, the requirement of a legitimate business reason for the use of losses is striking since, without applying a general anti-avoidance rule, the SII, endorsed by the courts, does not know the nature of the acts carried out by the taxpayer due to lack of of economic reasonableness.
Law No. 21,210 on Tax Modernization incorporated into the Inheritance and Donations Law a referral to the Civil Code, with the purpose of defining the concept of donation for the purposes of applying the Donation Tax, but as a consequence of said referral, the Tax Donations was restricted only to irrevocable donations.
In consideration of the modification, the SII was asked about donations between spouses and the general treatment of revocable donations, to which it indicated that they are not taxed with Donation Tax, without prejudice to the fact that the donee must tax with Income tax on the fruits of the donated thing, as it is understood that these are given in usufruct by the donor, and the applicable inheritance tax in the event that they are not revoked.
Notwithstanding the foregoing, donations will also be subject to the hint process in accordance with the general rules.
The SII specified that when an asset whose acquisition took place by virtue of a succession due to death, that is, an inherited asset, is disposed of, the higher value is determined by subtracting from the sale value, the acquisition cost, which corresponds to the value granted to the asset to determine the Inheritance Tax, provided that said tax has been paid.
Consequently, the non-payment of tax because it is prescribed on the date the effective possession of the goods is processed, does not grant tax cost to the purchaser and to whom must pay the tax for the higher value, considering, then, as such the entire price of the alienation.
It should be noted that the note in question does not clarify the situation of an effective possession that does not pay taxes because the amount of the goods is found in the exempt section.
Luz María Calvo