The legal model of withholding tax and its breach by case law

Abstract

This article describes in the first place the essential features of the «model of withholding tax» that lies at the base of the legal regulation of this figure, which is characterized by the autonomy of the obligation to deduct the tax from the payment. Subsequently it analyses a recent judicial doctrine that rejects the Administration’s right to require from the payer the unpaid amount of the withholding tax if the taxpayer has deducted from his Income or Corporate Tax only the amount effectively withheld. This doctrine is grounded on the argument that such requirement originates double taxation and consequently an unjust enrichment of the Administration.

In the author’s opinion, while this doctrine pragmatically solves a problem caused by the legal system of withholding tax, it nevertheless hardly fits into the law that governs this figure and in addition poses some theoretical and practical questions. In consequence, the author suggests a profound modification of the present withholding tax model.