The Spanish Central Economic Administrative Court establishes doctrine on the accreditation of tax losses declared by taxpayers

The Spanish Central Economic Administrative Court recently published two resolutions, dated 22 May 2025, establishing important doctrine on how to prove tax losses declared by taxpayers when the Spanish Tax Authorities initiate a verification procedure: it is necessary to keep all supporting documentation for the transactions corresponding to the tax years in which the tax losses were generated, provided that those tax years have not expired due to the lapse of the statute of limitations period of ten years. Specifically: self-assessments, accounting books and all documents justifying the transactions carried out during those years (e.g. contracts, invoices proving the expenses incurred, etc.).

What powers do the Spanish Tax Authorities have when verifying the tax losses declared by the taxpayer?

Under paragraph 2 of article 66 bis of the Spanish General Tax Act, the Spanish Tax Authorities have the right to verify and, where appropriate, modify the tax losses that have been offset or are pending to be offset, which have arisen within the ten-year tax limitation period starting from the day after the deadline for filing the return or self-assessment corresponding to the tax period in which the right to offset arose.

However, when the tax losses arose in statute-barred years (i.e. beyond the ten-year tax limitation period), the Spanish Tax Authorities cannot modify their amount, although they can also verify them for the purpose of confirming their existence.

Consequently, the Spanish Tax Authorities' power to verify the tax losses declared by the taxpayer differs depending on whether the tax losses were generated within the ten-year tax limitation period or beyond.

Does the way in which tax losses are accredited differ in each of the two above scenarios?

Indeed, according to the new criteria established by the Spanish Central Economic Administrative Court, for the purposes of accrediting tax losses declared by a taxpayer who is subject to verification, a distinction must also be made depending on whether the ten-year tax limitation period has elapsed:

• When the tax losses have been originated in not statute-barred years: the taxpayer must provide the self-assessments, the accounting books and the documentary evidence of the transactions recorded therein, corresponding to the financial years in which the tax losses were generated. If the documentary evidence of the transactions recorded in the self-assessments and in the accounting books is not provided, the taxpayer will not have proven the origin of the tax losses recorded.

• When the tax losses have been originated in statute-barred years: in order to confirm the existence of the tax losses that the taxpayers intend to offset, they must only provide the self-assessments from which the corresponding tax losses resulted, as well as the accounting books, with proof of its deposit during the ten-year period in the Spanish Commercial Registry.

Final comment

We would like to highlight the practical relevance of this doctrine established by the Spanish Central Economic Administrative Court (without prejudice to a possible review of it by the contentious-administrative jurisdiction), as it has clarified doubts about what documentation companies must keep in order to prove their tax losses in the event of a tax audit.

Under this doctrine, it has become clear that, in order to be able to prove the tax losses generated during the ten-year period open to possible verification and modification of the tax losses by the Spanish Tax Authorities, it is not sufficient for companies to keep the self-assessments and accounting books corresponding to those years; it is also necessary to keep all the documents required to justify the transactions carried out during those years (e.g. contracts, invoices proving the expenses incurred, etc.). If all this documentation cannot be provided, the Spanish Tax Authorities will not consider the tax losses that have been offset to be sufficiently proven and will proceed to eliminate them, with the consequent tax cost. Hence the importance of taking this doctrine into account when managing the maintenance of documentation by the taxpayers.