Recovery of the tax credit for environmental investments made in statute-barred or inspected years
As we have had occasion to discuss in our information bulletins (specifically in section 2.3 of the Tax Bulletin February 2013) the Directorate-General of Taxes (DGT) has admitted the possibility of reporting the tax credit for investments for the protection of the environment made in prior years and for which the certificate of approval was not requested at the time such investments were made.
Specifically, the DGT’s view is that it is possible to take the tax credit in another tax period subsequent to that in which the investments were brought into operation, as long as the certificate of approval had been requested before the start of the period for filing the tax return for the tax period in which it was intended to be taken, and provided that the tax credit is taken within a maximum period of 15 years to be counted from the conclusion of the tax period in which the investments were made.
Two recent rulings from the DGT (Rulings V2512-12 of December 20, 2012, and V0395-13 of February 11, 2013) have explored this line of reasoning in greater depth, analyzing the possibility of recovering the tax credits for investments for the protection of the environment made in years that are statute-barred or have been inspected. According to the rulings, and taking into account the evolution of the tax legislation, it would be possible to “redeem” the tax credit for investments made since fiscal year 2002, even if the fiscal years in which they were made were statute-barred or had been inspected (provided that in this last case no contingency in relation to the authenticity of the investments or other issues that could affect the future application of the tax credit had come to light).
Therefore, this view by the DGT opens up an interesting opportunity to review the environmental investments made since 2002 and on which the tax credit was not taken, thereby reducing the tax bill, for which purpose special attention needs to be paid to questions such as:
– What are the requirements for the tax credit in the fiscal year in which the investment was made?
– How should one prepare the application for requesting the certificate of approval necessary to take the tax credit?
– How is the tax credit applicable to investments made in prior years calculated?
– What is the most suitable procedure for evidencing this tax credit for past years?
– What is the tax impact of taking a tax credit from a prior tax period?
– Is this view transferrable to other types of tax credits?