Is the municipal capital gain constitutional?
The recent ruling of the Supreme Court confirms that the capital gain is only required when there is an increase of ...
The Constitutional Court, in a Judgment on May 11, 2017, declared the unconstitutionality of articles 107.1, 107.2 a) and 110.4 of the consolidated text of the Law Regulating Local Treasuries, referring to certain aspects of the Tax on the Increase in Value of the Lands of Urban Nature.
In relation to the foregoing, the Judgment of the Supreme Court of July 9, 2018 establishes that the first two cited articles suffer only from unconstitutionality and partial nullity, so they are applicable in all cases in which the taxpayer does not was able to prove the non-existence of an increase in value when transmitting land of an urban nature, contrary to the criteria of some Superior Courts of Justice that understood that the nullity was total and, therefore, it was not possible to liquidate the tax in any case, even when there is an increase.
As article 110.4 does suffer from total unconstitutionality, the taxpayer cannot be prevented from proving the inexistence of the increase, corresponding to him - and not to the Administration - to do so by any means of proof, such as, for example, with the difference between the acquisition and transmission value reflected in public deeds, or by expert opinion. Once the proof that the land has not increased in value has been provided, the Administration must, if it deems it appropriate, try to prove against said claims.
Therefore, this judgment of the Supreme Court confirms that the Tax on the Increase in Value of Urban Land (also known as municipal capital gain) is only required when, as its name suggests, there is an increase in value.