On August 13, 2013 the Administrative Appeals Court handed down a decision in favor of La Liga Sanitaria in an action for nullity filed by the company against a tax computation made by the General Revenue Service.

La Liga Sanitaria is Uruguay’s largest plumbing services company. During the 2002 economic crisis, to preserve its main assets, La Liga Sanitaria did a commercial restructuring, sharing out risks among the group’s different companies.

The tax authorities had found that this commercial restructuring was geared to evading taxes. Consequently they filed a complaint against the company for alleged tax fraud before the organized crime court, recalculated the taxes, imposing penalties for delay and fraud, and attached all of the group’s companies and company directors.

The company proved its innocence before the criminal court and the case was shelved. Nevertheless, the tax authorities maintained the recomputation they had made. The company paid the amount claimed in order avoid being shown as a debtor in tax records, and filed an action for nullity before the Administrative Claims Court, based on the “administrative economic unit.” theory. Under this theory the company can compute its taxes as a single unit, even if it consists of different companies.

The Administrative Claims Court decision established that the company correctly applied the concept of “administrative economic unit.” Consequently, it found that the debt computed by tax authorities was illegitimate, that there had been no fraud, and that no penalties were payable.