The Constitutional Court (TC) declared last October null the formula to calculate the capital gains tax, by which the municipalities charged a percentage of the increase in the value of real estate in the case of sales, inheritances and donations. Due to the economic crisis, in certain cases this tax was paid on real estate transferred with a loss of value of the house with respect to the date of purchase. According to data from the Ministry of Finance for 2019, the 8,000 Spanish municipalities entered 2,501 million euros for this tax.
The declaration of unconstitutionality of the regulations on the Tax on the Increase in Value of Urban Land or municipal capital gains is allowing taxpayers who transferred a property without making a profit or at a loss to claim what was incorrectly paid to the municipalities.
Before claiming the refund of the tax, it must be remembered that the TC established that the annulment effects of the unconstitutionality would not affect the capital gains that at the date of the sentence were final by means of a sentence or by firm administrative resolution.
But the Constitution also establishes that provisional or final settlements that have not been challenged at the date of this ruling and also self-assessments that have not been appealed to the municipalities may not be annulled. “It is in this limitation of temporary effects of the sentence that the controversy originates,” says Pelayo Ballesteros Panizo, a lawyer in the Fiscal Law area of the Mas y Calvet Law Firm.
With the decision of the TC it is intended to prevent, “in a completely unmotivated way”, according to Ballesteros, that the taxpayer rectify the self-assessments of the capital gains or the challenges according to the General Tax Law.
In order to successfully claim the return of capital gains, it is necessary to take into account three decisive dates. First, on October 26, 2021, date of judgment 182/2021 of the TC (whose text can be consulted here) and publication on the court’s website.
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On November 9, 2021, date on which Royal Decree-Law 26/2021 (whose text can be consulted here) approved by the Government to modify the Local Treasury Regulatory Law, reforming the articles declared unconstitutional, comes into force.
And on November 25, 2021, when the sentence is published in the Official State Gazette and becomes effective against the municipalities and citizens who have processed this tax.
In the first place, it is important to differentiate whether the capital gain was paid by self-assessment prepared by the citizen or if the taxpayer chose the settlement carried out by the city council. To challenge the settlements or rectify the self-assessments of the capital gain, the time of its presentation or claim must be taken into account.
Options to claim
Capital gains made as self-assessment by the citizen cannot be claimed if more than four years have passed since the presentation without requesting their rectification, since the taxpayer’s right to request a refund has expired.
If the citizen submitted a request for rectification of the self-assessment, but a final dismissal decision was obtained, it cannot be claimed for being an unassailable situation due to firmness or for the impossibility of requesting review because it is res judicata. In these cases, it could only be appealed provided that the four years of prescription had not elapsed, but only by invoking for its rectification a cause other than the one alleged in the first request.
The administrator has the right to request rectification if they have submitted the request before October 26, 2021, it has not been rectified, but it is within the deadline because the four-year limitation period has not elapsed.
If the rectification has been requested before October 26, 2021 and it is pending resolution, the taxpayer should see their claims estimated by the city council based on the ruling of the TC. A broad legal sector considers that this situation could extend to those rectifications requested before November 25, 2021, when the BOE published the sentence.
If the capital gain was presented by self-assessment between October 26, 2021 and November 8, 2021 (date of entry into force of RD 26/2021), Ballesteros considers that “there was no legal way to determine the tax base” and, therefore, the request for rectification must be submitted. In this way, the taxpayer will see the capital gain cancelled.
In liquidations, the amount to be paid for capital gains is calculated by the town hall and the citizen only indicates that he has sold or transferred an asset. With this information, the council makes the calculation and quantifies what it has to pay for the capital gain, turning the amount to be collected against the taxpayer’s account. This is the most common situation among citizens.
However, paying the capital gains through liquidation has an important limitation. And it is that the taxpayer only has one month from when the tax was collected to start his claim.
Therefore, if the liquidation has not been challenged within the legally established period of one month, the capital gain is unassailable due to the principle of legal certainty since it has become final.
When the liquidation has been appealed, but the challenge route has been exhausted, the council’s resolution becomes final. However, in these cases, a procedure of patrimonial responsibility of the Public Administrations could be initiated, yes, provided that the unconstitutionality of the calculation of this tax had previously been alleged. For this, there is a year to start the processing of this procedure. In addition, it will be necessary to be aware of the resolution of the procedure initiated by the European Commission by filing a lawsuit against Spain before the Court of Justice of the European Union for the patrimonial responsibility of the State.
In the case of citizens who have challenged the liquidation made by the city council until October 26 and are pending resolution, the taxpayer should see their claims estimated and recover the money paid in excess for the capital gain based on the Court’s ruling Constitutional. This situation could be extended to those rectifications requested before November 25, 2021, when the sentence was published in the BOE and is mandatory for all parties.
In this sense, Ballesteros recommends “keeping the claim procedures alive and preventing them from acquiring the firmness that would make them definitively unassailable.” And this will give different interpretations by the courts in relation to the resources for capital gains.
Dates without capital gains
The capital gains tax has been in a legal limbo since October 26, when the Constitutional Court issued the ruling, until the tax reform approved by the Government on November 9, 2021. “There is a gap during this period in the that the city councils cannot liquidate”, assures Manuel Mata, an expert lawyer in Tax Law and dean of the Castellón Bar Association.
In addition, in the capital gains of the transmissions made before the ruling of the TC, “if neither the City Council has proceeded to liquidate nor the taxpayer has self-assessed, it will not be able to do so as of October 26” because the rule to calculate this tax it is unconstitutional, according to Mata.
On the other hand, the General Directorate of Taxes of the Ministry of Finance has considered, in a response to a binding consultation on the sale of an urban property that took place on October 26, that the regulatory vacuum to determine the tax base of the tax “ prevents the settlement, verification, collection and review of this tax and, therefore, its enforceability.
There is the taxable event of the tax (the transfer of the property), but since the way of calculating it is declared unconstitutional, the capital gain cannot be demanded or liquidated. Thus, Tributos resolves that “the consultant will be obliged to present the tax declaration since the taxable event has been carried out and the tax has accrued, but he is not obliged to pay it in accordance with the provisions of the Constitutional Court in its judgment. 182/2021”.