On May 11, 2017, the Plenary of the Constitutional Court unanimously agreed to declare the unconstitutionality and nullity of articles 107.1, 107.2 a) and 110.4 of the revised text of the Law Regulating Local Treasuries, but “only to the extent that they have not provided for the exclusion from taxation of situations that do not express economic capacity due to the non-existence of increases in value”.
This judgment reiterates the doctrine already established by the Court in its judgments 26/2017, of February 16, and 37/2017, of March 1 (referring, respectively, to the establishment of this same tax in Guipúzcoa and Álava), according to which the establishment by the legislature of taxes levied on the increase in value of urban land is constitutionally admissible provided that they respect the principle of economic capacity set forth in Article 31 of the Spanish Constitution, so that the tax may not in any case be levied on acts or deeds that “are not exponents of actual or potential wealth”.
What are the effects of this Ruling in relation to the amounts paid in the past for this concept in cases where there has been no increase in the value of the land?
First of all, it should be noted that the Court states in this Ruling that the way to determine the existence or not of an increase susceptible to be subject to taxation is something that only corresponds to the legislator, to whom it entrusts the task of carrying out the relevant modifications or adaptations in the legal regime of the tax that allow to arbitrate the way of not subjecting to taxation the situations of non-existence of increase in value of land of urban nature, vetoing this possibility to the ordinary courts. Therefore, in the current situation of legal vacuum, a reform of the Ley Reguladora de Haciendas Locales is necessary to establish a legal criterion to determine when there has been an increase in the value of a plot of land.
By way of reference, as a consequence of the previous rulings of the Constitutional Court on the matter, the Provincial Councils of Guipúzcoa and Álava have approved regulations (Decreto Foral-Norma 2/2017, of March 28 and Decreto Normativo de Urgencia Fiscal 3/2017, of the Council of the Foral Government of March 28, respectively), establishing that the existence of the increase in value of the land will be determined by comparison of the acquisition value and the transfer value, referring for its determination to the values that should be taken into account for the purposes of the respective taxes that subject to taxation the transfer of ownership of the land or the constitution or transfer of any real right of enjoyment limiting ownership over the land. Likewise, the provincial regulations have established that if the values taken as a reference to determine whether there has been an increase in the value of the land do not differentiate between the value attributable to the construction and the value attributable to the land, the proportion existing with respect to the cadastral value in force at the time of accrual of this tax of the value of the land and the value of the construction will be taken as a reference.
In the hypothesis that the state legislator adopts a solution analogous to that established in those territories, this would mean that the actual price for which the acquisition or transfer was made would be irrelevant, it being necessary to analyze whether, by application of the rules of quantification of the tax base of the taxes levied on the transfer (Transfer Tax and Stamp Duty, Inheritance and Gift Tax, …), there has been an increase in the value of the land or not. In general, this will lead us to compare the real value of the land at the two points in time taken as a reference. For these purposes, we recall that the Autonomous Communities, within the scope of their competences in relation to these taxes, apply different valuation methods depending on the typology and location of the property, which in many cases allows the determination of its real value to be objective (multiplier coefficients on the cadastral value, average market prices,…).
Secondly, it is necessary to take into account the statute of limitations and the importance for these purposes of whether the tax has been subject to self-assessment by the taxpayer (insofar as, until now, the revised text of the Law Regulating Local Treasuries allowed the Local Councils to opt for this system) or to liquidation by the Tax Administration.
In the first case (self-assessment), the procedure will be the one provided for in article 221.4 of the General Tax Law, consisting of requesting the rectification of the self-assessment and the refund of the amount unduly paid, provided that no more than 4 years have elapsed since the end of the period for filing the self-assessment.
However, if, with reference to the self-assessment, verification actions have been carried out by the Administration that have ended in an act that has become final or if the tax was demanded through a liquidation by the Administration that has become final because it has not been appealed in time by filing the corresponding administrative appeal, in principle it would not be possible to request a refund (having to analyze in the last instance whether, in the specific case, the circumstances exist to initiate a special review procedure).
In conclusion, since the Ruling is positive for the interests of taxpayers who may be in this situation, a case-by-case analysis is necessary to determine the actions to be taken. Thus, if the tax was paid by means of liquidation made by the Administration (due to the short term -one month- to file the corresponding administrative appeal) or in the case of self-assessments whose statute of limitations period to request the refund is about to end, the taxpayer should file the corresponding appeal or request as soon as possible. Otherwise, we consider it advisable to wait for the approval of the necessary reform of the revised text of the Ley Reguladora de las Haciendas Locales that establishes the legal criteria to determine whether there has been an increase in the value of the land, in order to approach the procedure with the best guarantees.
May 29, 2017