In the post “ maternity benefit exempt from personal income tax ” we analysed a ruling by the High Court of Justice of Madrid that interpreted article 7.h) of Law 35/2006 in a way contrary to the criteria followed by the Tax Agency.
Arguing that maternity benefits were included in the cases of exempt income and therefore did not have to be taxed.
Both courts (Madrid High Court and Andalusia High Court) interpret women database article 7.h) of the Personal Income Tax Law differently.
Case history
An administrative appeal is filed in relation to a tax assessment and penalty. The appellant alleges that maternity benefits are exempt from tax.
In its third Legal Basis, the Court reasons that this type of benefit is not included in the exemption assumptions of article 7.h) of Law 35/2006 . Following the criteria of the Tax Agency, only regional and local benefits are exempt.
It makes a literal interpretation of the norm and recalls that the General Tax Law does not allow analogies to extend the effect of exemptions to other cases. The legislator gives unequal treatment between state benefits and regional and local benefits. It has limited the exemption only to the latter and has subjected to the tax those that the Social Security system generally recognizes in favor of workers and public employees.
Failure of the judgment
The Andalusian High Court dismisses the administrative appeal, considering that there is no reason to contradict the criteria followed by the contested resolutions.
Contradictory sentences
The Andalusian High Court adopts one criterion and the Madrid High Court adopts a completely opposite one . What happens now?
Both rulings are limited to the specific case, they do not have general effects nor do they extend to other cases. They do not generate jurisprudence nor force the criteria followed by the Tax Agency to change.
These two cases will not be the only ones, there will be more. The courts will adopt one criterion or another until it finally reaches the Supreme Court and will clear up our doubts about whether maternity benefits are taxable or not.