The Superior Court of Justice of Valencia confirms the sanction imposed on the D’Angelo brothel for not accruing VAT from the prostitution activity or part of the hospitality income from 2014 to 2016 | Remember that sexual services provided in exchange for a price constitute an economic activity that is not exempt from value added tax
The Superior Court of Justice of Valencia (TSJV) has confirmed a penalty of 390,821 to the management companies of D’Angelo Palace, a hostess club in Alicante, for non-payment of VAT in the years 2014, 2015 and 2016. The unearned tax corresponded to both the services performed by the prostitutes and part of the undeclared income of the hotel business itself.
In its reasoning, the Valencian High Court argues that both the Supreme Court and the Jurisprudence have been recognizing the requirement of income taxation from illegal activities, so the manager of the premises, well known in Alicante – scenes from the film were filmed there torrent 4– must pay undeclared VAT -379,438 euros- plus a fine of 11,382 euros.
The sanction was filed by the regional Economic-administrative Court of the Valencian Community in December 2021 in a procedure during which officials of the State Agency AEAT They entered the different companies that managed the premises in those years, Dan Hielo y Copas, Tamarinddo Creaciones and Esprimar 2015, with the aim of examining accounting and documents.
According to the Inspection, in this entry, carried out at the beginning of 2017, “substantial anomalies & rdquor; due to the discovery “of a double accounting & rdquor;, by not declaring the services” private or company & rdquor; neither part of the hotel services nor “the personnel expenses paid to the natural persons who provide the aforementioned private services, that are satisfied by means of cash payments& rdquor;, that is to say in “b”. Thus, the place, which was registered as a special category bar, kept a parallel accounting where this income was broken down.
The calculation of the VAT not accrued during the three years mentioned was established according to the Inspection, extrapolating the total income that the establishment had in the middle of 2015, from July 1 to December 31, and which amounted to a total of 2,130,000 euros. . The omission of accounting and tax records for these services gave free rein to the Inspectorate to apply the method of indirect estimatea to calculate the bases, since despite the fact that each year was a different company the one that the club operated, developed the same activity, had the same employees, “sharing part of the staff & rdquor ;, and maintained the same promotions, among other similarities.
In its appeal, one of the penalized companies, Tamarinddo Creaciones, denounced his “helplessness & rdquor; not having been sent the car to enter the premises, and that this was issued prior to the start of the sanctioning procedure. Likewise, the penalized company alleged that the imputation of income from sexual services to the premises was inadmissible, “being in any case enforceable to the person providing the aforementioned service & rdquor ;.
D’Angelo’s defense responded that this imputation of VAT to the company “starts from considering the existence of an employment relationship or dependency of the provider of sexual services with the company& rdquor ;, something denied by society, which it defended had no relationship with sexual services or with the people who came to the premises. Likewise, he criticized that the calculation made for VAT was based “on arbitrary data and illegally obtained evidence & rdquor ;.
In his argument, on the other hand, the State Attorney argued that the company was in charge of “selecting the personnel that accompanied the clients, maintaining a de facto relationship of dependency and alienation between the women who provide said services and the plaintiff company, corresponding to said entity the total ordering of the material and personal means of the club”. Even when it is not possible to speak of an authentic employment relationship between said company and the local workers, “the jurisprudence admits the taxation of income from illegal activities, as long as they are not criminal & rdquor ;.
The State Attorney estimated that during the investigation it was established that the payments for prostitution services “were made& rdquor; to the company, stating that “it had double accounting & rdquor ;, this being totally opaque. “Even admitting that they were null contracts for being contrary to the law, morality or public order, the company has received undeclared income, payments that must be computed for the calculation of the tax base of the liquidation of the company tax& rdquor ;, added. The State Attorney highlighted that the taxpayer “strives not to declare & rdquor; this income, for which he uses a “double ticket numbering system, revealing the will to violate tax regulations & rdquor ;.
In its ruling, dated November 30, 2022 and to which EL PERIÓDICO DE ESPAÑA has had access, the Superior Court of Justice of the Valencian Community recalls that both the Treasury and the Administrative Economic Court of the Valencian Community consider that the income from prostitution / sexual services are subject and not exempt to VAT, “being the company Tamarinddo Creaciones the passive subject of this indirect tax, for being attributable to the services provided by the club itself.”
“It has been made clear and it is recorded in the file, that the prostitutes are hired by the appellant entity to carry out these jobs that are offered in the club’s advertising by different means & rdquor ;, the website, already inactive, being a “conclusive example of it”. In this they advertise, for example, appreciates the sentence, “an exclusive selection of wonderful and glamorous young ladies & rdquor; and “external services are also advertised, with the exclusive selection of beautiful company ladies who will travel to your hotel & rdquor ;.
The judge finds it proven that the plaintiff He ran the business, and organized the human and material resources, as well as setting prices and keeping the accounts. “It has been proven that the prostitutes could not be workers or independent professionals of the club that had hired them, and therefore could not be taxpayers of VAT, since it has become clear that the requirements of alienation and dependency were met with respect to the plaintiff company & rdquor; .
In the ratification of the sanction, the sentence maintains that prostitution “freely & rdquor; exercised is “allegal & rdquor ;, since it is not regulated nor prohibited, but remember that the Supreme Court has been recognizing the requirement of taxation of income from illegal activities, as well as the Court of Justice of the European Union.
“In the field of the European Union and despite the different legal regulations, we must determine that the sexual services rendered in exchange for a price, they constitute an economic activity subject to and not exempt from VAT for reasons of strict neutrality and tax justice and despite the risk of thereby laundering a situation contrary to the dignity of women”, concludes the judge, who also endorses the development of inspection and indirect estimation.
The last word, from the Supreme
The sentence is not final, and in fact it has been appealed in cassation before the Supreme Court, which must give a definitive answer to this question, have pointed out to The Newspaper of Spain, from the Prensa Ibérica group, legal sources. This newspaper has tried unsuccessfully to Obtain their assessment of the judicial decision.
The high court has recently touched on the elusive issue of compliance with the administrative legality of these premises but in relation to the High social security of their employees. He concluded that women who work in what is called ‘toggle’ –dealing with clients in nightclubs so that their stay is longer and thus increases spending on drinks– must comply with this requirement and if employers evade this obligation they commit a crime against the rights of workers.
This is established by the Criminal Chamber of the Supreme Court in various convictions that confirm the employment relationship that unites women with the managers of the premises and that differentiate their activity from the exercise of prostitution.
In the most recent, issued on January 25, the owner is sentenced to six months in prison and the manager of the Las Marismas club in Cícero, a town near Santoña (Cantabria). Twenty people regularly worked in said premises, including waiters, a cook and “girls who performed hostess and dance activities& rdquor; but only the first were registered with social security. There were also ten rooms where prostitution was practiced and some of these women lived, who declared that they carried out said activity freely.
For the Supreme Court, the activity of ‘hosting’ generates economic returns, consistent with the previous organization of capital and work, “which must be subject to tax and labor conditions that protect workers”. He distinguishes this practice from prostitution, about which he warns that if it is exercised “in subordinationsubject to orders or instructions from the employer on who, how, when and where it must be carried out, is contrary to human dignity” and, therefore, violates the Constitution.