New calculation of the Municipal Tax on the increase in the value of urban properties – “Plusvalía”.

The government approves the real decree law 26/2021 that establishes the new rules for the calculation of the taxable base of  “Plusvalía” tax.

As we indicated in the note published on our website and social networks, last 26 of October, the Plenary of the Constitutional Court declared the unconstitutionality and nullity of articles 107.1, second paragraph, 107.2 A) and 107.4 of the Refunded Text of the Law of Local Taxes, referring to the municipal “Plusvalía” tax. The Court states that by declaring nullity of the aforementioned precepts, these precepts are expelled from the legal regulations and a normative gap remains with regard to the determination of the taxable base of the “Plusvalía” tax. This circumstance prevents the liquidation, verification, collection and revision of this local tax and, therefore, its exigibility. However, the Constitutional Court (hereinafter TC) highlights that it will not be possible to appeal on the basis of the Sentence against liquidations that have not been challenged and which, therefore, are definitive in administrative proceedings or which, having been challenged, have been the subject of a definitive judicial decision.

The TC also indicates that “it must now be the legislator (and not this Court) which, in the exercise of its freedom of regulatory configuration, must implement the relevant modifications or adaptations to the legal regime of the tax in order to adequate it to the requirements of art. 31.1 EC, which have been evidenced in all the constitutional pronouncements on the legal precepts which have now been annulled”.

On 9 November, Real Decree-Law 26/2021 (hereinafter RDlaw) was published in the Official State Bulletin (BOE), which adapts the refunded text of the Regulatory Law of Local Treasuries to the recent jurisprudence of the Constitutional Court. In definitive terms, the Government fills the normative gap that has been created as a consequence of the nullity of the precepts that regulated the calculation of the taxable amount of the  “Plusvalía” tax. At in turn, it adapts this calculation to constitutional requirements. Below are the most relevant aspects of the RDlaw:

It is expressly stated that there would not be any tax liability in respect of which it is established that there is no increase in value due to the difference between the values of the land on the dates of transfer and acquisition. It must be the interested party who proves that the increase in value has not occurred, by providing the deeds documenting the transfer and acquisition (in the case of a sale, these will be the deeds of purchase and sale). However, if the value of the land has been verified by the Tax Administration and this verified value is higher than the price or value that appears in the deeds, it would be be the verified value that will be used to establish whether or not there has been an increase in value.

– The RDlaw aims to improve the technique of the objective system for calculating the tax base (the previous objective system of calculation was declared null and void by the TC due to there being no alternative to it) by trying to ensure that it reflects the reality of the real estate market at any moment. Furthermore, this method becomes optional (thus overcoming the requirement of the TC), so that the taxpayer may request that the taxable base of the “Plusvalía” be calculated by means of the difference in value reflected in the title of acquisition and the title of transfer. Thus, for example, in the case of a purchase and sale, the taxpayer may opt to request that the “Plusvalía” be calculated on the basis of the difference between the purchase price and the sale price, without taking into account other expenses. In this way, as long as the sale price is lower than the purchase price, no “Plusvalía” will be generated.

When the objective calculation is applied, the value of the land is multiplied by coefficients which must be approved by the respective local councils and which may not exceed those indicated in article 107.4 (these coefficients, moreover, will be the ones applied whilst the local councils do not approve them). The coefficients are based on the period of generation of the “Plusvalía”(permanence of the property in the ownership of the taxable person). In turn, the value of the land is constituted by the cadastral value. Therefore, it is indicated that when the cadastral value is the consequence of a value assessment that does not reflect planning modifications adopted after the approval of the aforementioned assessment, this tax may be provisionally liquidated in accordance with that value. In these cases, the definitive liquidation will be based on the value of the land once it has been obtained in accordance with the collective valuation procedures that may be implemented, referring to the date of accrual.

– As a new feature, a coefficient is established to tax “Plusvalía” generated in less than one year, i.e. those that occur when less than one year has transpired between the date of acquisition and the date of transfer.

The RDLaw does not make reference to past situations, so it has no retroactive effect and applies only to situations that will be generated in the future. That said, we must distinguish the following scenarios:

1.- Transfers that have been produced before the 26th October 2021 (date of the TC Sentence). In this case, two situations may be distinguished:

1.1.- If the Town Hall has liquidated the “Plusvalía” tax and it has not been impugned, it could not be appealed on the basis of the TC Sentence. In the same way, in those local town halls where it is managed by means of a self-liquidation, if it has already been presented, it will not be possible to rectify it either. Although it should be noted that there are fiscal experts who maintain that it is convenient to impugn the self-liquidation tax in the event that the Court of Justice of the European Union supports this in the future.

1.2. – The other situation is that the auto-liquidation of the “Plusvalía” tax has not been presented or the liquidation has not been practiced by the Town Council. In these cases, there are doubts about the position that the tax administration may take. In the event that the “Plusvalía” tax is liquidated, an appeal could be considered on the basis that it has been generated at a time when the existing regulation has been declared null , and the TC Sentence only indicates that it would not be retroactive for liquidations that have been declared definitive.

2.- Transfers that have been produced between the 26th of October 2021 (date of the TC Sentence) and the 9th of November 2021 (date of publication of the RDlaw).

In this case there seems to be no doubt as to the impossibility of claiming “Plusvalía” tax, given that there is no rule for calculating capital gains in this time period.

3. – Transmissions occurring on or after 10 November 2021.

“Plusvalía” tax will be paid in accordance with the rules established in the RDlaw