Municipal capital gains tax: To be claimed before 25 November

The EU Court considers that the rule regulating compensation for financial liability is contrary to EU law. This opens the door to reclaiming municipal capital gains prior to the declaration of unconstitutionality.

Asset Liability

1.Compensation: The patrimonial liability of the State is a procedure that allows affected entities and citizens to obtain compensation for the malfunctioning of the State and that, among other things, makes it possible to recover taxes that have been paid and then declared unconstitutional or contrary to European law.

2.Law too restrictive: Since 2015, important legal restrictions have been introduced that make it very difficult to initiate this procedure:

• Prior challenge: Since then it has been required that, prior to the declaration of unconstitutionality or contravention of EU law, the settlement must have been previously challenged in court.
• Final judgment: In addition, it is required that the claim has been rejected and that a final judgment rejecting the claim has been obtained.

3.Time limitations: Only taxes assessed within the previous 5 years may be claimed, and the claim must be filed within a maximum period of one year, counting from the publication of the judgment declaring the infringement of EU law or unconstitutionality.

4.Infringement proceedings: In view of this tightening of the requirements, the European Commission initiated infringement proceedings against Spain on the grounds that the principle of effectiveness (i.e. that in practice the complaint procedure is inapplicable) was violated, and the case has finally reached the European Court.

5.Contrary to EU law: The Court of Justice of the European Union considersthat this regulation is partially contrary to EU law because it makes it excessively difficult to obtain compensation. Among other details, it determines that, although it is reasonable to require the prior filing of appeals, this cannot be a mandatory requirement when there is no contestable administrative action (this is the case, for example, of taxes that are self-assessed by the taxpayer).

Municipal capital gains

1.Pending the courts: The European Court only refers to breaches of EU law, so it is possible that its extrapolation to cases of unconstitutionality (such as the old municipal capital gains tax rule) will not be admitted by the courts, thus allowing claims to be filed for final judgments from previous years for disputes over this tax. Therefore, we will have to wait to see what the majority criterion is adopted by the courts.

However, given that this matter will be the subject of litigation and the issue is not closed, it is advisable to claim until 25-11-2022.

If you have any doubts regarding this issue, please do not hesitate to contact us, by telephone to Carles Monfort Codina or by e-mail to cmc@btsasociados.com, we will be delighted to help you.