In the same way as the "municipal surplus value", the Business tax (IAE) is regulated in el Royal Legislative Decree 2/2004, of March 5, which approves the revised text of the Regulatory Law of Local Treasury, and has as taxable event: "It is a direct tax of a real nature, whose taxable event is constituted by the mere exercise, in national territory, of business, professional or artistic activities, whether or not they are exercised in a specific place and whether or not they are specified in the tax rates.”. The calculation of this tax is made through a fixed fee or through the objective weighting of different elements such as the surface area, the Kw contracted, the location of the premises within the municipality, etc.
The aforementioned tax is exempt, on the one hand, from the start of activity, since it does not tax the first two years of the same, and on the other hand, when the legal entity invoices less than one million euros.
Notwithstanding the foregoing, it can be seen that the magnitude to be levied with this tax is both the performance of the economic activity, understanding this as a source of wealth, and on the other hand, the turnover of over one million euros. However, the tax does not take into account, at any time, that the performance of the economic activity does not have to be a source of wealth in itself, since said activity can give economic loss, as well as exceed the turnover of one million of euros is not either, per se, sign of economic capacity.
After said analysis and linking with the latest pronouncements of the Constitutional Court, in which the Tax on the Increase in the Value of Urban Land (Municipal Capital Gains) is declared unconstitutional, as it is a tax that does not tax economic capacity, but rather had a completely objective tax calculation system, we must reflect on whether the Tax on Economic Activities is not another tax that should "suffer the same fate", given that its own taxable event is "objective", insofar as it does not take into account an economic capacity as it must be the obtaining of benefits, but rather objective data such as the performance of an economic activity and a turnover of more than one million euros.
In addition to this objectification of the taxable event of the tax, it is not trivial that with the inflation that our country is currently suffering and that closed with an average CPI of 8,9% in September, a large number of micro-SMEs that have had to pass on the greatest cost of the prices of raw materials to their customers, they will have to pay this tax, without having an increase in their business profit or even having generated losses, since this increase in billing often does not translate into greater profit. However, they can therefore overcome the billing barrier of one million euros and, therefore, lose the tax exemption that they maintained to date.
In addition to the above, until January 1, 2022, the exemption for this tax, for having a turnover of less than one million euros, was for each of the companies and groups of companies of article 42 of the Code of Commerce, except if they consolidated fiscally. In this case, the total turnover of the group was taken into account.
Well, to the greater detriment of the taxpayer, the Government in the Law 11/2021 of July 9, on measures to prevent and combat tax fraud, took the opportunity to modify this extreme, introducing that all those groups of article 42 of the Code of Commerce, whether or not they consolidate fiscally, should pay the Tax on Economic Activities taking into account the billing of all their Companies. Therefore, if the group had a turnover of more than one million euros, all the companies in the group should be taxed for said tax, without taking into account, as we have indicated, the economic capacity of the group.
For this reason, we understand that it is necessary to modify the current regulation of the tax in two aspects: firstly, the taxable event, which should take into account the economic capacity of the legal entity, which carries out the activity that is going to be taxed, insofar as the mere fact of carrying out an economic activity cannot be taxed if it has not led to the obtaining of a benefit. And on the other hand, the executive should update, as indicated above and taking into account current inflation, the tax exemption for billing in excess of one million euros, since companies have been forced to raise the prices of their products and services, which in many cases will mean overcoming the billing barrier of one million euros without having increased their economic capacity and seeing it, in any case, reduced by the loss of exemption in the payment of this tax. Lastly, we wonder if the executive will wait, once again, for the Constitutional Court to be the one that obliges to modify the regulation of this tax or will they modify its current regulation ex officio, taking into account a taxation system that is not objective and, therefore, that it respects the principle of economic capacity regulated in article 31 of the Spanish Constitution.
Javier Castilla Fernandez
Manager of the Fiscal Area of Tomarial
