The Supreme Court has declared this Monday that users may request a refund of what was paid for the municipal capital gains when in the transfer carried out there was no increase in the value of the land and, furthermore, it had not been appealed within the deadline. The collection of this tax is carried out by the town councils, so it would be their financial accounts that will be affected by this ruling. The Ministry of Finance, which has not yet received the ruling, refers to the decision of the high court in its entirety in order to carry out an assessment and economic calculation.
The Second Section of the Third Chamber of the Supreme Court establishes that the tax on the increase in the value of urban land, the capital gain, will have to be returned in cases in which, having paid for a gain that did not really occur, there is a firm tax settlement. Until now there was no clearly established channel in the tax legislation to obtain the ex officio review of these assessments, even if they were the result of having applied a law that was declared unconstitutional.
The Constitutional Court declared in 2017 that it was unconstitutional to liquidate the capital gain when the taxable transfer does not produce an increase in the value of the land. The Government had to approve a decree-law to adapt the jurisprudence in force to the ruling. But the sentence left in the air what the Supreme Court now requires. The jurisprudential doctrine has been considering in recent years that final liquidation acts were exempt from this declaration of unconstitutionality.
Now the high court reviews its previous jurisprudence and establishes that, since there is no limitation of effects in the declaration of unconstitutionality made by the Constitutional Court in 2017, the firm liquidations of the capital gains in which there was no increase in the value of the lands are null and void.
The speaker of the sentence was Judge Rafael Toledano Cantero. In it he explains that the law declared unconstitutional has imposed on taxpayers who had to pay the tax without having obtained profits on their land “a tax burden where there had been no increase in value or wealth that could be subject to taxation.” The Supreme Court considers that there has been a “violation of the principle of economic capacity and the prohibition of confiscation” contained in article 31.1 of the Constitution.
Until now the courts and contentious-administrative tribunal have been resolving these tax claims in a disparate manner, so the Supreme Court ruling has notable fiscal effects.
