You Can Now Request a Refund of the IAE (Economic Activities Tax) for Prescribed Tax Years.

Companies that paid the Tax on Economic Activities (IAE) to their City Councils in 2020, despite being forced to close due to the pandemic, may request a partial refund of those amounts. And this, even though the four-year limitation period provided for in the General Tax Law (LGT) for the return of undue income has elapsed.

This has been established by the Supreme Court in its ruling number 57/2026, of January 26, 2026, which opens the door for thousands of companies - the vast majority of companies, including those in hospitality, travel, and many that have not been able to work since March 2020 - to claim from their councils the part of the tax corresponding to the months in which they had to remain compulsorily closed.

The High Court understands that, since economic activity was prohibited during the harshest months of the pandemic by factum principis (act of authority), these companies could not carry out the taxable event during that period, “given the coercive deprivation of the right to exercise the activity” that occurred.

The Second Section of the Contentious-Administrative Chamber considers, therefore, that forced closures fully fit into the exceptional cases provided for in rule 14.4 of the IAE Instruction, which contemplates a proportional reduction of the quota when there is a cessation of activity for justified causes.

It is also important to highlight that companies that paid the IAE in 2020 despite being closed by government order are not required to prove said stoppage to the City Council "nor to inform the Administration of such closure or inactivity, since both circumstances derive directly from the law." In the opinion of the Supreme Court, these are facts “well known” by the councils, which could only require additional evidence in specific cases, such as that of companies that had maintained some activity during those months (and which the ruling itself exemplifies in the case of home delivery companies).

Beyond this recognition, the most relevant aspect of the ruling is that it confirms the current right of the affected companies to claim the return of the proportional part of the IAE corresponding to the closing time, even though more than four years have passed and, therefore, the ordinary period provided for in the General Tax Law has expired.

The magistrates reason that the mandatory closure of establishments agreed by the Government since March 2020, in different phases, “makes it possible to rescind a firm liquidation of the IAE and the return of the income” to ensure the equity of the tax burden in the face of an exceptional, irresistible situation justified by the preferential protection of other constitutional values. They also add that the City Councils had to “explore any legal possibility” that would lead to the immediate proportional reduction of the fee, in order to guarantee that companies paid only what they were really entitled to.