The system of calculating the municipal tax on the increase in the value of land – the so-called “municipal capital gain” – was declared unconstitutional (ruling of October 26, published in the BOE of 25 Economic Capacity.

As a result, the regulations have been changed since November 10, 2021 (by the Royal Decree-Law 26/2021of November 8) so that the tax is in line with these principles. First, the law already provides that transfers that do not show any appreciation in the value of the property since the acquisition date should not be taxed (in practice this has already been applied).

Also as a novelty, capital gains realized in less than one year are taxed, i.e. those that arise when less than a year has elapsed between the date of acquisition and the date of transfer.

Calculation basis: two methods

In the event of an increase in value, the taxpayer can determine the tax base in two different ways, choosing whichever is most suitable for him.

On the one hand, it can be calculated by applying new maximum coefficients to the cadastral value of the land or taking into account real profit. Another formula would be to calculate the tax base using the difference between the transfer value and the acquisition value of the property in question.

who can get rid of

The new regulation does not apply retrospectively. Royal Decree-Law 26/2021 does not provide for retroactivity of its provisions.

This situation creates a kind of legal vacuum for the operations conducted in the period from the announcement of the full judgment of the Constitutional Court on October 26, 2021 (and published in the BOE on November 25) until its entry into force. the Royal Decree-Law, on November 10, 2021.


Katia Khadouje, Tax and Legal Department of ESCURA

The judgment of the TC of October 26, 2021 declared the unconstitutionality and nullity of Articles 107.1 second paragraph, 107.2ª) and 107.4 of the consolidated text of the Local Treasury Law, which regulates the quantification system of the tax base of the municipal capital gains tax.

The sentence states that the tax obligations arising from this tax, which have been finally decided by a final judgment or by a firm administrative decision at the time of their collection, cannot be considered as facts subject to review on the basis of this sentence.

Due to the declaration of unconstitutionality, on November 9, 2021, the Council of Ministers passed the RD Law, which changes the way the municipal capital gains tax is calculated in order to align it with the judgment of the TC. The municipalities therefore have six months to adapt it to their legal framework. This RD law provides two alternatives for calculating the tax:

• Target formula: In this case, the cadastral value of the property is multiplied by new coefficients. New coefficients are approved every year, which are taken into account in the General State Budget Law and will develop according to the real estate market. This formula is an optional method.

• Real formula: It is a calculation of the difference between the sale price and the purchase price of the property. If the taxpayer proves that the real capital gain is lower than that resulting from the objective estimation method, he can apply the real capital gain.

Also new is that capital gains realized in less than one year, calculated between the date of acquisition and the date of transfer, are taxed.

Mariela Asensio, Fiscal Division JDA/SFAI

Since 2017, the Constitutional Court has ruled against the regulations that governed the IIVTNU (capital gains), until finally the articles that determine the tax base were declared unconstitutional.

In a hurry and faced with the impossibility of municipalities to collect the tax, Royal Decree-Law 26/2021 was passed amending the Municipal Financial Supervision Act, which establishes the new way of calculating the tax base of the tax.

It had to be changed and has been known since the first judgment in 2017, but it is incomprehensible why it has waited so long, leading to situations of legal uncertainty for taxpayers.

The new method of calculating the capital gains seems more reasonable and fair since it excludes the liquidation obligation, which proves that there has been no increase in the value of the property, and allows the choice between two calculation methods applying coefficients to the cadastral value or to the difference between the acquisition and Pay transfer value. These maximum coefficients apply until the municipalities do not change their tax codes, for which a period of six months has been set.

It should be noted that this adaptation of the norm to the judgment was processed by the Legislative Decree, which could again be declared unconstitutional. This means that since it cannot have retroactive effect, it would not regulate previously made transfers that have not yet been settled or self-billed, which would remain orphaned and contestable.