The Constitutional Court has advanced, by means of an informative note, the content of a judgement declaring the unconstitutionality of the Tax on the Increase in Value of Urban Land (IIVTNU), the well-known “plusvalía municipal”. In particular, the Supreme Court declares the unconstitutionality and nullity of Articles 107.1, 107.2 (a) and 107.4 of the Law regulating Local Treasuries concerning the method of calculating the tax base of the tax.
Thus, the judgement, which is still pending publication, states that the objective method of calculating the tax base of the tax implies that there is always an increase in the value of the land during the tax period, regardless of whether there has actually been such an increase and the actual amount thereof.
The determination of the tax base of the tax and the confiscatory nature of the tax as a result of such determination has already been discussed in previous decisions by the same Court, namely in 2017 and 2019. So far, however, unconstitutionality arose from particular cases in which the transfer of the property involved a real loss for the taxpayer or simply the capital gain obtained by the transferor was lower than the alleged capital gain of the land, calculated according to the contested calculation method.
These previous decisions already provoked an avalanche of challenges to recover the amount paid for the tax, and it seems that the final blow to this tax (IIVTNU) now made by the Supreme Court will only increase it. Nevertheless, it is worth waiting for the wording of the judgement to see if the Constitutional Court will safeguard the possibility of retroactively challenging the tax returns and self-assessments, since the municipal capital gains tax has been one of the main sources of income for the Spanish municipalities.
In fact, one of the paragraphs of the Informative Note issued by the Court states that the judgment declares the intangibility of situations that were firm before the date of approval of the judgement, which some sources already understand as a reflection of the non-retroactivity of the judgement. We will, however, remain expectant for its publication before considering such a conclusion.
While the awaited judgement is pending publication, what we can already say is that the announcement of the decision has raised controversy among the Plenary judges and also within the country’s media, which has echoed the news and claims that the Legislator and the Treasury should continue to ensure this means of financing local bodies with a new tax regulation in line with the Court’s criteria.
