The Constitutional Court’s ruling on the so-called municipal capital gains tax has been published and has left no one indifferent. There are several dissenting opinions that differ from the content of the ruling in one aspect or another.
First of all, what is the municipal capital gains tax?
Municipal capital gains tax is the tax applied to the increase in the value of urban land once a property is transferred, sold, inherited or received after a donation. It is a local tax, i.e. it is levied by local councils.
Article 137 of Law 7/1985, Regulating the Bases of Local Regime (LBRL), imposes the creation of a body for the creation of a body for the “knowledge and resolution of claims on acts of management, liquidation, collection and inspection of taxes and public law income, which are of municipal competence” on the Town Councils considered to be “of large population”. This is known as the Municipal Economic-Administrative Tribunal, which is responsible for resolving, for example, appeals against municipal capital gains settlements and self-assessments.
These local councils are obliged to create a body for the resolution of economic-administrative claims brought by citizens against local tax acts.
Which municipalities are considered to have a “large population”?
a) Municipalities with a population of over 250,000 inhabitants.
b) Provincial capital municipalities with a population of more than 175,000 inhabitants.
c) Municipalities that are provincial capitals, regional capitals or seats of regional institutions.
d)
Likewise, municipalities with a population of over 75,000 inhabitants, with special economic, social, historical or cultural circumstances.
The settlements issued by Town Councils that do not have a municipal Economic-Administrative Court may be null and void.
When a Town Council, being obliged to have an Economic-Administrative Court, has not set one up, it alters the appeals system provided for in the Law.
Thus, the appeal for reconsideration, which should be optional (voluntary), becomes obligatory when a municipality does not have a Municipal Court. And after the resolution of the appeal for reconsideration (which is resolved by the Town Council itself), the taxpayer is inexorably doomed to go to court.
The taxpayer is deprived of one of the appeals provided for by law (economic-administrative claim). In addition, the taxpayer is sent to the courts, which will generate legal defence costs, as the intervention of a lawyer is mandatory, and in which he runs the risk of being ordered to pay costs.
Let us return to the ruling…
The court declares the unconstitutionality and nullity of articles 107.1 second paragraph, 107.2.a) and 107.4 of the revised text of the “Ley Reguladora de las Haciendas Locales” (approved by Royal Legislative Decree 2/2004, of 5 March), relating to the method of quantification of the taxable base of the municipal capital gains tax.
Nevertheless, a limitation has been set by excluding from the possibility of claiming all those situations which, at the date of this ruling, have been definitively decided by a judgment with the “force of res judicata or by a final administrative decision”. Provisional or definitive settlements which have not been challenged at the date of this ruling, and self-assessments whose rectification has not been requested at that date, are also considered consolidated situations for these purposes.
The Constitutional Court declares the nullity of a regulation but places time limits on it, which can cause serious comparative damage, such as, for example, what can happen to capital gains accrued days before the judgement and which have not been challenged by the date of the judgement.
Furthermore, from now on, there is a legal vacuum in terms of how the capital gains tax is calculated and therefore the tax cannot be paid or demanded until a regulation is issued to replace the unconstitutional articles.
We therefore consider that we must study each case on a case-by-case basis to find out whether we can avail ourselves of the provisions of the ruling or the viability of another legal route according to the legal reasoning of the Constitutional Court.
What happens to those taxpayers who are still within the deadline for submitting their self-assessment?
With regard to transfers that have taken place before the entry into force of the Royal Decree-Law pending self-assessment, these taxpayers cannot calculate what they are going to pay using the new regulations, because these do not have retroactive effects. The interested parties will only be able to self-assess with zero base and zero quota, due to the known unconstitutionality of the applicable rules. In the event that the City Council settles, they will be able to appeal against this settlement.
What happens with those operations carried out between the 26th of October 2021 and the 10th of November 2021? And the previous ones?
Regarding the first question (accrual of the IIVTNU between the 26th of October 2021 and the 10th of November 2021), as the Royal Decree-Law is not retroactive, it leaves a legal vacuum for these dates.
With regard to the second question, it is not appropriate to demand payment of settlements not made before the date of the ruling.
Do I still have to pay if I am asked for the tax to be paid in installments?
In principle yes, because it is a tax with a consolidated situation and if you did not appeal the liquidation or request a rectification of the self-assessment, we are dealing with an enforceable tax, and the ruling does not affect tax obligations that have already accrued.
Taxable events after the 9th of November: The new regulation will apply.
As of the 10th of November and with the entry into force of the Royal Decree-Law, those who carry out a transfer that is subject to this tax will have to apply the new regulations and, therefore, proceed to pay this tax if there has been an increase in value. In the case of a transfer with a handicap, they will not.
In any case, the possibility of claiming on the basis of the aforementioned Constitutional Court Rulings 59/2017 and 126/2019 remains open, as long as we find ourselves in the cases covered by them.
If you are affected by the payment of this tax, please contact us and we will assess your situation, do not hesitate to call us now or send us an email.
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