Supreme Court Ruling on Municipal Capital Gains Tax Refund

In a recent judgement of the Second Section of the Third Chamber of the Supreme Court, the Supreme Court has ruled on the possibility of obtaining a refund of the municipal capital gains tax, also known as the Tax on the Increase in Value of Urban Land.

This judicial decision marks an important precedent, addressing an issue that has generated controversy in different judicial and administrative spheres. Previously, the lack of a clear channel in tax legislation for ex officio review of final tax assessments constituted an obstacle to the refund of the amount paid for this tax in cases where there was no real increase in the value of the land.

The ruling of the Constitutional Court declared unconstitutional certain rules related to this tax, in situations where there had been no increase in the value of the land. However, previously, it was considered that this declaration of unconstitutionality did not affect final and consented tax assessments, due to the absence of a clear mechanism to review them ex officio according to the General Tax Law.

However, the recent Supreme Court ruling revises this previous interpretation and establishes that, as there is no limitation on the effects of the declaration of unconstitutionality made by the Constitutional Court, final capital gains tax assessments in cases where there was no increase in value are null and void.

Unfair tax burden

The Supreme Court argues that the application of the unconstitutional law has generated an unfair tax burden, violating the principles of economic capacity and prohibition of confiscation established in the Spanish Constitution. In this sense, the Constitution itself establishes that the effects of an unconstitutional law must be rendered ineffective, as far as possible.

Based on this constitutional interpretation, the Supreme Court concludes that the General Tax Law does allow for the ex officio review of these final settlements in cases where there is no increase in the value of the land. Although the wording of the law is not explicit in this respect, the Constitution and the Organic Law of the Constitutional Court enable the classification of these settlements as null and void, which makes it possible to request a refund of the amount paid, together with the corresponding interest.

This decision of the Supreme Court establishes a unified criterion in an issue that had been resolved in a disparate manner in the different contentious-administrative courts and tribunals, thus modifying previous case law. Its impact is significant, as it offers a clear way for taxpayers to claim a refund of the amount paid for municipal capital gains in cases where there has been no real increase in the value of the land, even if the settlements are final.

If you have any doubts regarding this issue, please do not hesitate to contact us, by telephone to Núria Martí García or by e-mail to nmg@btsasociados.com, we will be delighted to help you.