Cemex simulated multiple operations in Spain to defraud taxes | Economy

Cemex vehicle at Barajas Airport (Madrid).
Cemex vehicle at Barajas Airport (Madrid).CEMEX (Europa Press)

The judgment of the National Court against Cemex Spain is forceful. The Litigation Chamber almost completely confirms the fine of 456 million imposed by the Treasury on the main Spanish subsidiary of the Mexican multinational Cemex. In the text of the ruling, which has just been published, the judges reject the appeal presented by the company and support the thesis of the inspection, according to which “the intervention of the Spanish entity in numerous operations was intentionally simulated” in order to defraud taxes.

The litigation dates back to 2011, when the Spanish Tax Agency fined the subsidiary of the cement company in the country – it was the highest sanction ever imposed by the Treasury until then – for irregularities in corporate tax. Specifically, he accused her of having artificially fattened her losses between 2006 and 2009 through simulated operations, with the sole objective of obtaining tax credits for subsequent years.

After a first unsuccessful appeal before the Central Economic Administrative Court (TEAC), which agreed with the treasury, Cemex turned to the National High Court. The company filed an appeal of almost 400 pages, trying to defend the legality of its operations and to combat the fine alleging prescription and other defects of form. However, he hit a wall.

The judgment of the Contentious Chamber dismantles one after another its arguments and aligns itself with the Treasury. The judges only hear the appeal of Cemex Spain in a secondary aspect of the appeal ―for which they do not oblige it to take charge of all the costs―, but in almost all the operations they confirm the infractions that were already supported by the Economic Court Central Administrative (TEAC). The Mexican group had already reported last week that its appeal had been rejected and that it will appeal the fine again, this time before the Supreme Court.

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The text of the ruling describes a complex tangle of loans, capital increases, purchases and liquidations of companies and other financial operations that go through the London Stock Exchange or the Australian and through places such as Holland, Hungary, Luxembourg or Delaware (USA) , with the common denominator that, according to the Treasury, the TEAC and the National Court, their purpose was to artificially reduce the payment of taxes in Spain.

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“For this reason, in our opinion, the TEAC is right when it affirms that the existence of simulation can be appreciated when ‘throughout the file evidence is collected that allows questioning the very reality of the operations and that shows that these, regardless of the formal appearance that they present, are part of a conscious and deliberate planning whose purpose is to harm the Spanish treasury ”, says the sentence in reference to one of the disputed operations.

“Tortuous operations”

The sentence collects and endorses the content of the sanctioning resolution, according to which, “the purpose of these operations consists of reducing the tax burden by deducting the different tax expenses artificially created or placed in Spain by the global group Cemex to reduce the Cemex Spain’s taxable base (basically financial expenses, impairment of shares or losses in disposals and liquidations) ”.

“This set of operations has been carried out through repeated and tortuous aggressive tax planning operations with the use of multiple companies located in different countries and with a large number of operations,” he adds.

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The Hearing supports the argument of the Treasury for which it is necessary to carry out a “global analysis”, instead of evaluating each operation separately, to understand the nature of the complex maneuvers of the cement company. According to the inspection, “an intragroup lending carousel” designed to this, which resulted in financial income and expenses “in the most appropriate tax jurisdictions to obtain deductions in jurisdictions with higher tax rates and income in which tax treatments are zero or low taxation.”

Cemex Spain obtained benefits for its operating activity of more than 550 million in the audited years, but in the same years it declared negative tax bases or tax losses ten times higher (more than 6,331 million) due to financial results ―expenses for debts with third parties, group companies and associates and provisions – charged to the Spanish subsidiary which, according to the court agrees, derive from operations that are not justified, in which “the tax effects achieved have prevailed, measured in the generation of a multiplicity of expenses ”.

“Repeated, complex and varied operations are carried out, some of them concatenated, without real substrate and with the sole purpose of reducing the tax base in Spain”, concludes the ruling. And he adds: “It should be noted that the conduct is not isolated, but reiterated, the avoidance purpose of the operations is evident and the effect on the tax base is, in several cases, double deduction.”


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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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