Author: José María Salcedo

Source: Idealista

Many taxpayers continue to challenge the municipal capital gains tax, embroiled in countless battles, with different arguments and claims depending on which regulations apply in each case, or whether they filed their claims before or after a certain date. The truth is that litigation continues unabated, growing with each attempt by the Constitutional Court to silence those who continue to demand refunds of the municipal capital gains tax. If you paid or have recently paid the municipal capital gains tax, this is a current snapshot of the claim you can initiate and the arguments you can use in your claim.

First of all, there are countless taxpayers who have paid a tax whose calculation system was declared unconstitutional (STC 182/2021). Naturally, they want to recover what they unfairly paid. These taxpayers are currently the main focus of municipal capital gains tax claims. This is mainly because they feel they have been taken for a ride.

It is unacceptable that the same ruling that declared the tax they paid unconstitutional, due to the taxation of a fictitious increase in value, would seek to leave those same taxpayers without any possibility of claiming a refund simply because they did not file before the ruling was issued. These taxpayers were taken for fools, and the response was a flood of claims as soon as the ruling was announced, which are now before the Supreme Court.

Therefore, it is advisable to keep these appeals alive and to challenge any resolution that dismisses or rejects claims filed in the days following October 26, 2021, when the declaration of unconstitutionality was announced. The Supreme Court could recognize these taxpayers’ right to a refund of what they paid. Therefore, no one should throw in the towel or abandon their claim.

Moreover, the administration continues to treat taxpayers as fools, denying them the possibility of claiming a refund of the municipal capital gains tax, even though they are within the time limit to do so. This is the case for taxpayers who are still requesting corrections of self-assessments filed less than four years ago, applying the now unconstitutional regulations. Why shouldn’t they do so if they are within the time limit to request such a correction?

The administration and probably many courts will respond that this is a “consolidated situation” because the Constitutional Court declared it so in its well-known ruling 182/2021, dated October 26. However, can the Constitutional Court act as a positive legislator, conjuring up consolidated situations not explicitly provided for in the regulations?

I refuse to believe it. Therefore, as a voice crying out in the wilderness, I still believe that taxpayers in this situation should continue to claim the refund of the unconstitutional tax they paid, even if they did not claim it within the arbitrary timeframe now imposed by the Constitutional Court.

The new municipal capital gains tax regulations approved to replace those declared unconstitutional (Royal Decree-Law 26/2021) have also failed to calm things down. Since its approval on November 9, 2021, it has been plagued by constant doubts about its constitutionality.

At this point, the law has avoided a first checkmate thanks to the lifeline offered by the Constitutional Court in a recent ruling we have learned about (unsurprisingly, through a press release) just a few days ago. The highest interpreter of our Constitution has endorsed the use of the Royal Decree-Law for almost everything, ignoring the extraordinary and urgent need that should guide its use, as well as the impact on the duty to contribute that involves substantially altering the second-largest revenue-raising tax at the local level.

Nevertheless, doubts about the constitutionality of the new regulations persist, suspected of violating the principle of economic capacity. It is claimed that there is now a real calculation method that taxes the land’s increase in value. However, taxpayers are not allowed to account for expenses and investments made on the land that have reduced such an increase in value, nor can they adjust the purchase price of the land according to the CPI.

Therefore, it is understandable that the so-called real calculation method ultimately taxes what it taxes but not the actual increase in value that the taxpayer has obtained from the land’s transfer.

Furthermore, the coefficients applied in the objective calculation method of the taxable base lack motivation and justification, adding even more uncertainty to an already fictitious tax.

Additionally, there are municipalities that have continued to levy the tax without adapting their municipal ordinance beyond the six-month period granted by the new tax regulations (Royal Decree-Law 26/2021), risking that the assessments issued are null and void.

Given all this, doesn’t it seem that there are still plenty of reasons to continue litigating against the new municipal capital gains tax?

And generally speaking, there are municipalities that should have the economic-administrative route available to review their taxes but do not. Some municipalities even lack the necessary tax imposition agreement to validly demand it. Finally, many assessments are issued beyond the six-month period stipulated in the General Tax Law, in which case the procedure should be declared expired, and the assessment issued should be annulled.

In short, there are many open fronts regarding the municipal capital gains tax and opportunities to recover what was paid. However, it is advisable to enter the jungle of arguments and contradictory judicial rulings in the matter of the municipal capital gains tax with the guidance of a professional expert in tax litigation. This is necessary to have real chances of recovering what was paid and to know when to retreat if the claim does not seem likely to succeed.

As Sun Tzu (The Art of War) said, knowing the opponent and oneself will not endanger victory.

José María Salcedo is the managing partner of Salcedo Tax Litigation and a specialist in filing all types of administrative and contentious-administrative appeals against any acts of the Tax Administration. He is also the author of the “Practical Guide to Appealing Against the Treasury” and the “Practical Guide to Challenging the Municipal Capital Gains Tax,” a speaker in courses and seminars on tax procedure, and a regular contributor to the media.