Death and resurrection of municipal capital gains, miracles outside the law?


The controversy surrounding the tax on the Increase in Value of Urban Land, commonly known as municipal capital gain, is not new, but arose before its approval, in 1988, when its illegality was already denounced when establishing the absolute presumption that all urban land transfers produced an increase in value subject to taxation.

The May 11, 2017, Almost thirty years after its approval, the Constitutional Court finally declared unconstitutional and null those precepts of municipal capital gains that were subjecting to tax situations of non-existence of an increase in the value of the land and entrusted the legislator with the modification of the regulations to

adapt it to your pronouncement.

Subsequently, on October 31, 2019, and without the legislator having done his homework, the Constitutional Court issued a new ruling in which the regulation of municipal capital gains was declared unconstitutional, but in this case for those cases in which the quota to be paid is higher than the capital increase obtained by the taxpayer. The Constitutional Court took the opportunity to remind the legislator that two years had passed since his previous sentence and that the regulatory regulations had not been modified of this tax.

Well, more than four years after the 2017 ruling, on October 26, 2021, the Constitutional Court surprises us with the disclosure of an informative note in which it limits itself to stating that The articles that regulate the objective calculation method of the tax base have been declared unconstitutional and null. of the municipal capital gain.

This announcement, again, generates a frenzy. For taxpayers, who see the possibility of claiming the refund of the amounts unduly paid under a tax whose calculation formula has been declared null and, in the words of the Constitutional Court itself, has meant «Their expulsion from the legal system, leaving a regulatory void in the determination of the tax base that prevents the liquidation, verification, collection and review of this tax and, therefore, its enforceability “. And for the municipalities, which not only see their public coffers endangereds, but they also fear being collapsed by the volume of taxpayers’ claims requesting the return of what was unduly paid.

However, on November 3, the text of the sentence handed down on October 26, 2021 is known by the Constitutional Court in the matter of unconstitutionality 4433-2020 (hereinafter, the “judgment”) and, to the surprise of many, the Constitutional Court limits the effects of the declared nullity preventing the following situations from being reviewed, based on it:

1) The Accrued tax obligations that, as of October 26, 2021, have been definitively decided by means of a judgment with force of res judicata or by means of a final administrative resolution.

2) Provisional or definitive settlements that, as of October 26, 2021, have not been contested.

3) The self-assessments whose rectification had not been requested before October 26, 2021.

When the tax is paid through a self-assessment (as is the case in most large municipalities), The taxpayer has a period of four years to urge the rectification of the self-assessment presented and, where appropriate, request the return of the amounts unduly entered. Well, and here comes the most surprising thing, the ruling of the Constitutional Court has determined that, for the exclusive purposes of this ruling, these self-assessments will be considered consolidated and not susceptible of being challenged.

Regarding the limitation of the effects of the Constitutional Court ruling, there are many of us who defend that we are before an assumption of ordinary and non-constitutional legality and, consequently, it should be the ordinary courts that, in the event that taxpayers appeal situations considered consolidated by the Constitutional Court, decide whether or not they are consolidated and whether the effects of the judgment apply to them.

On the other hand, the judgment also indicates that it corresponds to the state legislator to carry out the pertinent modifications or adaptations in the norm, to adapt the municipal capital gain to the constitutionality requirements indicated by the Constitutional Court in the ruling and in the previous two.

As well, without the sentence being published, based on the principles of necessity and effectiveness and the convenience of avoiding possible immediate distortions in the real estate market, the Council of Ministers has used the royal decree-law, specifically on 26/2021 (hereinafter, the “royal decree-law”), in order, as it says in its explanatory memorandum, “to respond to the mandate of the High Court to carry out the pertinent modifications or adaptations in the legal regime of the tax as a consequence of the last of the referred judgments, as well as integrating the doctrine contained in the other two judgments, for the purpose of give unity to the tax regulations and comply with the principle of economic capacity.

Article 86 of the Spanish Constitution empowers the Government to issue decree-laws in cases of extraordinary and urgent need and, as stated in the explanatory memorandum of the royal decree-law, in this case the extraordinary and urgent need to approve the legislative reform demanded by the Supreme Court in: “the need for immediate restoration of the enforceability of the tax in order to preserve the constitutional principle of budgetary stability, as well as the convenience of avoiding possible immediate distortions in the real estate market that aggravate the situation urgently.

And, as expected with this tax, the fact that this modification has been approved through a royal decree-law is not without controversy, and the Ministry knows it, but it seems clear that it has preferred to get out of this situation, resuscitate the tax, and wait to see what happens in the future if it will be, again, the Constitutional Court that, analyzing the legality of the royal decree – promulgated law has to return to kill him.

In our opinion, the problem posed by the royal decree-law in this case does not reside so much in the «extraordinary and urgent need» of the measure to be agreed (although it is difficult to see the urgency in this case when the legislator has been with this pending task since 2007), but rather that the decree-law is vetoed from certain aspects of tax regulation, such as the duty of citizens to contribute to the maintenance of public expenditures in accordance with their economic capacity, through a fair, inspired tax system on the principles of equality and progressivity. And it will be the constitutional Court the one that, in last instance, has to decide if the determination of the taxable base of the municipal capital gain is or not an essential element of the tax.

Marisa Ramírez Prieto, lawyer at the Tax Law Department of Alemany, Escalona & De Fuentes

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