Tax authorities and Supreme Court give taxpayers hope that they will not have to pay capital gains tax

Regulatory changes to legalise and constitutionalise the municipal capital gains tax came into effect on 10 November. The rule is not retroactive, so more taxpayers than the government expects are exempt from paying the tax. Now, the Directorate General of Taxes, part of the Ministry of Finance, has clarified the circumstances in which taxpayers must declare capital gains after moving house but are not obliged to pay the tax. As for the Supreme Court, it offers hope for taxpayers claiming a tax refund.

Tributos analysed a case in which a taxpayer acquired a plot of land on 26 October, the day the Constitutional Court ruled that municipal capital gains were unconstitutional because of the way they were calculated. Agencies under the Treasury Department have determined that if taxpayers sell their homes from the date of the constitutional ruling until the new tax law comes into force (10 November 2021), they are obliged to file the following return: Municipal Capital Gains Tax, because “under the Constitution The Court in its Ruling No. 182/2021 provides that a taxable event has taken place and a tax has been caused, but there is no obligation to pay the tax”.

Sales of properties where no tax was filed prior to the unconstitutional filing

In addition it also addresses this issue: when the tax is declared unconstitutional (before 26 October 2021), disposals of properties that have not yet been declared. This is common in inheritances, considering that there is a six-month deadline, extendable to one year, to declare or self-assess the tax. The governing body was asked whether these taxpayers would now have to declare transfers and pay the municipal capital gains tax.

The answer was that these taxpayers “will be obliged to file the corresponding municipal capital gains tax declaration because the taxable event has occurred and the tax has been caused, but they are not obliged to pay the tax, according to the Constitutional Court in its N° 182/2021. stipulations in the award.”

In the same situation would be those taxpayers who declared the municipal capital gains tax and have not yet been notified of the liquidation. The taxpayer complied with his obligation to declare, but after the unconstitutionality declared on 26 October 2021 it is not possible to demand payment of the tax.

What happens to those who have claimed a tax refund after 26 October?

Those who appealed against the tax assessments that had been notified to them or requested the rectification of the self-assessments submitted at the time. The problem is that, if they did so once the declaration of unconstitutionality was known (from 26 October 2021), the local councils are considering that the unconstitutionality is no longer applicable, as the situation is consolidated. This, even if all these claims had been filed before the Constitutional ruling was published in the Official State Gazette (BOE), which was published on 25 November 2021.

A recent ruling by the 3rd Court for Contentious-Administrative Proceedings in Valencia interprets the effects of the limitation of the effects of the Constitutional ruling, contained in its 6th Legal Basis, and has reached the conclusion that “an interpretation of the sixth legal basis, which has not been challenged at the date of this ruling, in accordance with the provisions of art. 164.1 EC, means that this date coincides with the date of publication of the ruling, and not with the date that formally appears in the ruling. It is therefore fully applicable. The settlement is contrary to law, and the appeal is upheld”.

In other words, the Court considers that these taxpayers will be legally protected to appeal the municipal capital gains tax. “It seems certain that it will be the Supreme Court that will end up resolving this issue. But, until that happens, this ruling gives wings to those taxpayers who ventured to request a refund of the municipal capital gains tax, before the STC 182/2021 was published in the BOE”.