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Municipal capital gains become a source of tax litigation

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Conference on municipal capital gains: one year after the Constitutional Court's ruling

The municipal capital gains tax, one year after the Constitutional Court's Decision 59/2017, which declared the nullity of certain provisions of the Law of Local Treasuries, continues to be an important focus of litigation, while the possibility of recovering the fees paid by taxpayers in certain cases remains open.

"The forthcoming regulation does not seem to be going to completely end this situation of litigation", said Miguel Ángel Galán, partner in the Tax Department of Andersen Tax & Legal, during his speech at the conference on municipal capital gains organised today in Valencia, which also had the participation of José Antonio López Ramírez, territorial director of Tinsa's Eastern Region, and María Olleros, partner of Andersen Tax & Legal and director of the firm's Tax Department.

During the day, Miguel Ángel Galán referred to the Constitutional Court's ruling, issued in May 2017, which declared certain provisions of the Law unconstitutional, insofar as they allowed the payment of the Tax on the increase in the value of urban land (IIVTNU), or municipal capital gains, in cases that were not significant in terms of economic capacity. Basically, the cases in which sales were made at a loss or without any profit. The regulation of the tax undoubtedly ignored the economic reality of the operations it taxed.

As he explained, after the ruling, the possibility was opened of recovering those quotas paid on the occasion of transfers in which there had been no increase in the value of the land, provided that the settlements were not final. Therefore, the door was opened to new claims from taxpayers who had paid the tax before the competent city council and "being the origin of the current litigation on this issue after the real estate crisis experienced in previous years".

Galán pointed out that, a year later, "the legislative amendment to the tax has still not been approved, without it contravening the Constitution, which has been interpreted by some courts as a legal vacuum that prevents the tax from being paid". In this regard," he continued, "the Supreme Court has admitted several appeals in cassation, the ruling of which could open the way to claim practically all the settlements made by the local councils, even in cases where there has been an increase in value, if it is finally confirmed that the declaration of nullity of the aforementioned rules leaves the settlements issued before and after the ruling without legal protection, always respecting the limit of the finality of the settlement acts".

The Andersen Tax & Legal partner argued that those affected have the option of resorting to keep the liquidation alive. If the tax has been paid by the City Council through the corresponding liquidation, he has said that the important thing is to prevent the same degree of firmness. On this point, he stated that "to this end, the appropriate administrative and judicial appeals must be considered, and their fate varies according to the territory". "We'll have to wait for the ruling of the Supreme Court. In the case of self-assessments - not all municipalities have this system in place - the deadline for appealing is considerably extended, although it should not be neglected", he added.

Finally, he has made an assessment of the proposed law currently being processed in the Congress of Deputies since March, which, in his opinion, does not provide an adequate technical response to the regulation of the tax.

For his part, José Antonio López has analysed the main issues to be taken into account in the expert evidence required for the claim for this tax and has appealed to the importance of not confusing the cadastral value of a good with the price, both deeded and market.

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