Saturday, September 30

The Supreme Court obliges retired NATO officials to pay personal income tax on their pension

The Supreme Court has issued a ruling in which it obliges retired NATO officials to pay personal income tax for the pension they receive in Spain. In a sentence, issued the same month in which Madrid hosts the summit of this international organization, the contentious judges agree with the State Attorney and lay down its jurisprudence on this matter: a NATO official does not have to pay taxes for his salary but for his retirement pension.

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The judges of the third chamber, as has learned, have studied the case of a retired NATO official who questioned the liquidations of the Income Tax of Physical Persons for the years 2014, 2015 and 2016 applied to his pension . The Superior Court of Justice of Madrid had agreed with him and had annulled the resolutions, forcing the Administration to return the money and to understand that he did not have to pay personal income tax on his pension.

The case reached the Supreme Court, which understood that it needed to form jurisprudence on this matter due to lack of precedent. The State Attorney had taken the case to the third court alleging that it is true that the 1951 Ottawa Convention recognizes that NATO officials “shall enjoy tax exemption with respect to salaries and other emoluments received from the Organization in their capacity as of civil servants”, but that this could not be extended to pensions once retired.

The TSJM understood that yes, explaining that in other international organizations such as the United Nations (UN), this right had been recognized for retirees residing in Spain. But now it is the Supreme Court that says the opposite and forces those pensioners to pay personal income tax to the public coffers. “Analysing the NATO legal heritage, the conclusion obtained is that the tax exemption of officials in terms of their salaries and other emoluments that they receive from the Organization in their capacity as officials does not extend to pensions,” says the Supreme Court.

The Supreme Court reproaches his colleagues in the Madrid territorial court for resorting to the rules of international organizations outside NATO to resolve this case. “The decision appealed from appeals to regulations exogenous to the specific legal heritage of NATO when what it should have done was interpret the Ottawa Convention and the rules of that organization,” he explains.

The judges, in this firm resolution issued two weeks ago, explain that article 17 of the Personal Income Tax Law is clear in stating that pensions are subject to this tax. “In the absence of any other provision, natural persons residing in Spanish territory are subject to personal income tax, regardless of the place where the income received comes from and whatever the residence of the payer is,” specifies the Supreme Court.

The matter would be different, he adds, if the Spanish laws contemplated “the exemption of the pensions of retired NATO personnel, as a result of a specific provision” as is the case with the European Union, but this is not the case.