The Supreme Court has rejected the first four appeals filed by companies and citizens in which they claim compensation from the State for the municipal capital gains tax, annulled by the Constitutional Court. This tax collected nearly 2,000 million euros and its elimination opened the door to billion-dollar compensation.

In four different rulings, the contentious-administrative chamber of the Supreme Court has dismissed the appeals that alluded to the State’s patrimonial responsibility for this tax figure, technically known as Tax on the Increase in Value of Urban Land (IIVTNU).

In October 2021, the Constitutional Court annulled the tax, which applied to the profit generated when selling a property. He considered that the calculation of his tax base was based on fixed parameters that did not reflect the true evolution of the real estate market.

That decision forced the Government to reconfigure it, so that now the taxpayer can now choose between the difference between the sale and purchase value or, secondly, coefficients based on the cadastral value.

The question was what happened to the taxes already paid. The Supreme Court now resolves it in part through rulings that focus on the claims raised by the path of patrimonial responsibility of the legislative State. It is the correct formula because the Constitutional Court’s own ruling expressly limited other means of claim, such as the review of tax obligations or other formulas.

The Supreme Court concludes that the Constitutional ruling “does not necessarily lead (…) to classify as illegal the payment of certain amounts for the (tax) or that these amounts, by equivalence, constitute effective damage from the perspective of patrimonial liability” In other words, the payment of the tax does not in itself breach the legislation.

In order for it to be possible to claim the responsibility of the State, it points out, “it is necessary to prove through the means of proof established in the tax system that the taxable event has not occurred or that it has occurred in an amount different from that established by the Administration with its objective estimation method, or that the calculation rules applied were incorrect.”

None of these extremes were proven in the four cases examined, he states. In two of them, an increase in the value of the land was directly recognized by the appellants and in the other two, direct estimation of the value was allowed through evidence. In the latter cases there was an increase in the value of the land and, consequently, a “manifestation of real or potential wealth whose taxation is fully compatible with the Constitution.”

The court considers that from the Constitutional ruling the plaintiffs could understand that there is a “presumption of the illegality of the derived damages.” However, this is not necessarily the case. There is no such thing, the Supreme Court assures, “the automatism sought by the plaintiff,” who I understand is entitled to compensation just for having paid the tax.”