There are files that seem to sleep the peaceful sleep of the righteous in the drawers of the Administration until the reality of the balances forces them to wake up. A query to the Canary Tax Agency, number 2,286, addresses a situation that began in 1994, when a Canary Island municipality, which is not identified, and a Port Authority, which also remains unnamed, created a mixed company to manage a pool complex. What appeared to be a simple administrative management turned into a web of unresolved IGIC issues spanning three decades.
The conclusion of the Canary Island’s Deputy Minister of Finance, Gabriel Megías, is a relief for those involved. Given that the accrual occurred in 1995, any right of the Administration to settle that debt has long since expired, as the general term is four years. The Administration concludes that there is no obligation to pay any fee. In the complex ecosystem of the Economic and Fiscal Regime (REF), sometimes the political interpretation of a regulation from thirty years ago is what saves the day today.
The 1995 Agreement: Shares for Fees
Everything dates back to December 1994, when a municipality and a Port Authority decided to join forces in a mixed company to exploit a pool complex in a marine park. A year later, in April 1995, an administrative concession was granted for 30 years. The agreement included a clever clause: instead of paying a semiannual fee in cash, that money would be capitalized to increase the Port Authority’s stake in the company. However, the reality was more static than the water in those pools: the accrued IGIC was never paid, nor was that fee activated or capitalized during all this time.
30 Years Lost
In light of the uncertainty over whether the regional Treasury would intervene now that it is time to regularize the situation, the General Directorate of Taxes has been unequivocal. Firstly, it clarifies that, although the granting of concessions in ports is subject to IGIC, Port Authorities enjoy the same exemption regime as the State. Therefore, those invoices that were never issued in the 90s were, in fact, exempt due to the very nature of the public entity.
However, the most fascinating point of the resolution comes with the capitalizing of the shares that is intended to be executed now. The Canary treasury argues that, technically, the tax accrual for those shares already occurred prematurely in 1995, at the moment the concession was received as ‘payment’. With more than four years having passed as stipulated by law for the Administration to act, the right to demand any fee has completely expired. The combination of the State’s tax immunity and the relentless passage of time has allowed this port operation to sail into calm waters, free from outstanding tax debts three decades later.
The 1995 Agreement: Shares for Fees
The crux of the conflict lies in a concession granted on April 5, 1995 for a period of 30 years. The agreement was unique: rather than a cash payment, the semiannual fee would be ‘capitalized’, meaning it would be converted into shares of the company for the Port Authority. However, time passed, and, as the query admits, the IGIC was never paid, nor was that capitalization effectively executed.
The Lens of IGIC: Subject, Exempt, or Prescribed?
The Canary treasury has had to break down the operation on two fronts to determine if it can still reach into the pot: Although the law states that concessions in ports and airports are subject to IGIC, in this case a ‘shield’ law applies. Port Authorities are subjected to the same tax regime as the State, and services rendered by the State are exempt from this tax according to current regulations (Law 20/1991 and later). The fact of paying with shares rather than cash is typically subject to IGIC as a business operation. But here the factor of time comes into play: The treasury determines that the accrual (the birth of the obligation to pay) occurred prematurely in 1995, at the moment of the total ‘price’ payment (the granting of the concession).
News written by Raquel Molina. Edited and verified by Pedro Marrero. Information cross-checked without institutional filters. This analysis has not been funded by official advertising or conditioned by lobbying interests.
