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Is the decree about the document duty justified?

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Antonio Ñudi analyzes in El Independiente the decree of the tax on documented legal acts after the November 6th Supreme Court ruling

The Government, making use of its exceptional legislative competence through the Royal Decree Law, under the justification of the urgent need and almost with the sole argument of providing legal certainty to our extraordinarily large mortgage market, has decided to nip in the bud the decision of the controversial Plenary of the Contentious-Administrative Chamber of the Supreme Court of last November 6, which returned to the traditional interpretation that it was the borrower, i.e. the consumer, who had to bear the payment of the Tax on Documented Legal Acts (IAJD).

The Plenary, in a very tight vote, came to sever the ephemeral jurisprudence of the Second Section of this Chamber, embodied in its no less controversial three judgments handed down in October, which established a shift in doctrine by reinterpreting the law, in the sense that the passive subject of the IAJD owed the lenders, that is, the Bank.

A quick reading of the Explanatory Memorandum of Royal Decree-Law 17/2018, published in the Official State Gazette of 9 November, is enough to show how thin the line is that sometimes separates the legislative power from the executive when the Government legislates on certain matters, such as taxation, and the danger it runs in the invasion of powers that are not its own. Hence the fear felt in the text of the Royal Decree Law (RDL) by a hypothetical reproach of our Constitutional Court, if any.

The legislative reform, which although it is true has a very limited legal scope, since it affects only the tax levied on public deeds drawn up on the occasion of a loan with a mortgage guarantee and which only modifies 2 articles of the Consolidated Text of the AJD Law, has, on the contrary, an enormous scope in terms of the volume of operations, since every year a large number of consumers become mortgage debtors. In 2017, 311,000 mortgages were signed.

The RDL modifies article 29 of the legal text, to determine that the taxpayer, the person liable to pay the tax, is the one who lends the money and not the one who receives it, unloading, at least on paper, the cost of a mortgage for the consumer. It also modifies article 45, so that it is not a deductible expense of Corporation Tax.

This regulatory change will only affect operations that are formalized after its entry into force, ie November 10, 2018, so consumers who have signed a mortgage loan before that date, don’t benefit from this reform.

In view of what has happened, another thing is the political impact of the decision, it is very debatable that the budgets are given for the Government to exercise its exceptional legislative competence through the RDL, since the reasons of extraordinary and urgent need are not given, nor is greater security granted to the system since, irrespective of the questionable reasons that led the Supreme Court to question the judgements handed down by Section Two, the Plenary of the Administrative Bench of the High Court had already resolved the issue and made it clear that it was returning to the criterion that the tax should be paid by the consumer. All of this without forgetting that article 86.2 of the Constitution obliges the approved RDL to be submitted to Congress for debate and vote and, consequently, for its validation or repeal, so it does not guarantee a safe ground either, for the time being.

See the article in El Independiente

More information: Antonio Ñudi

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