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Before entering into the study of the judgment of the Constitutional Court (TC) of October 26, 2021, which declared this tax unconstitutional and of the Royal Decree-Law 26/2021 that, as a consequence of said judgment has adapted the Regulatory Law of the Local Haciendas (LRHL) should start from the basis of the concept of what is a Tax on the Increase in the Value of Urban Land (IIVTNU) popularly known as Municipal Plusvalue Tax.



The IIVTNU is a direct, real, municipal, optional, real and instantaneous accrual tax, in accordance with the legal regime of the LRHL.


In relation to the taxable event of this tax, the LRHL provides that it is the increase in value experienced by urban land as a result of the transfer of ownership of such urban land by any title or the construction or transfer of any real right of enjoyment, limiting of the domain, on the referred lands.


Regarding the legal businesses that imply transfer of property, there are the following: sale, exchange, donation, inheritance, excess of adjudication, compulsory expropriation, judicial or notarial auction and usucapio. And as for the real rights of limitative enjoyment of the domain (that is, they do not imply transmission): usufruct, right of habitation, right of emphyteusis, right of surface, censuses or administrative concessions.




The ruling of the TC of 26th October 2021 was the end of the Tax on the Increase of the Value of Urban Land. Given the legal vacuum left by this ruling, the government approved on November 8, 2021 Royal Decree-Law 26/2021, adapting the Consolidated Text of the Law Regulating Local Taxes to the jurisprudence of the TC:


Basically what the TC ruling comes to say is that the procedure for calculating the Municipal Capital Gains Tax is contrary to the principle of economic capacity and therefore null, mainly because the taxable base was determined from the cadastral value of the land corresponding to the year of the transfer and applying a coefficient that varied depending on the period of tenure of the urban property, without taking into account either the economic result or the amount actually obtained from the transfer of the land.


The judgment determined that it will not be possible to claim amounts that were not already appealed before the sentence was issued (October 26, 2021).




The new regulation maintains the tax nature of the tax. This is, the tax is levied on the increase in the value of the land that materializes at the time of transmission over a period of 20 years.


Two options are established to calculate the tax (the taxpayer may choose the one that is most beneficial):


1) The calculation through the cadastral value at the time of the transfer multiplied by the coefficients approved by the municipalities. These coefficients may not exceed those provided for in art. 107.4 of the Consolidated Text of the Local Finance Regulatory Law (LRHL).


2) This option will consist of valuing the difference between the purchase value and the sale value. If the taxpayer demonstrates that the real capital gain is less than that calculated with the cadastral value, this method may be applied.


This Royal Decree-Law is not retroactive, so there would be a legal vacuum from the moment the sentence was issued (10/26/2021) and the entry into force of the new legal regulation (11/10/2021).


Regarding resources, when the tax is paid through self-liquidation (in most cases) the taxpayer has a period of 4 years to request a review of the amount paid (remember that it will not be possible to appeal final settlements prior to 10/26 / 2021).




For the Inland Revenue Office technicians, the new regulation by Royal Decree-Law could violate the principle of legal reserve of art. 133 of the Constitution. That is, it should be understood that the LRHL being of a higher rank could not be modified by a Royal Decree-Law. We must understand that a royal decree-law is a legal norm with the status of law that emanates from the executive power and is issued in case of extraordinary and urgent need. It requires subsequent ratification by the legislative power (since the executive would be taking away powers from the legislative power justified by the extraordinary and urgent need). The issue lies in the existence of an extraordinary and urgent need that could lead to the eventual unconstitutionality of the Royal Decree-Law.


According to the opinion of these same technicians from the Ministry of Finance (Gestha), they have urged the municipalities to approve the Tax Ordinances before the six-month deadline. If we take into account that the tax is "optional" (not all municipalities apply it), the absence of an Ordinance would be interpreted as that the City Council in question could not demand this tax until the approval of the new Ordinance. This new application could not be retroactive.


Notwithstanding the foregoing, the Transitory Provision of the Royal Decree says: "Until the amendment referred to in the preceding paragraph enters into force, the provisions of this royal decree-law will be applicable, taking, for the determination of the basis taxable of the tax, the maximum coefficients established in the wording of article 107.4 of the consolidated text of the Regulatory Law of Local Treasuries given by this royal decree-law ”.


Summarising, regulation or adaptation by Royal Decree-Law and the approval of new Ordinances may cause new problems in the future.

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