Following the Sentence issued by the Constitutional Court (TC) the past 11 of May of 2.017 (STC 59 / 2017) about us the Goodwill Municipal, an important discussion was derived as to the scope of the same. And the fact that the Judgment was not as clear as it would have been desirable caused more shadows than light.

In addition, the fact that the Constitutional Court urged the legislature to amend the Law on Local Taxes only fueled the fire, which could not be stifled since throughout this period of time (14 months) it has not proceeded to the legislative amendment.

Simultaneously, a jurisprudential thesis that has been gaining followers from the STC of May of 2.017 (driven by an initial Judgment of the Superior Court of Justice of Madrid) has come to consider that, according to the STC 59 / 2017, any tax assessment, as Municipal Capital Gain, based on the merits of the provisions that regulate the Law of Local Taxes (LHL) to liquidate the Capital Gains Tax must be considered null (although the transmission has supposed benefits for the seller) to have been issued based on articles of the Law of Farms Premises that were "expelled from the source" of the legal system.

These three issues have caused different local and supra-municipal administrations to have filed different appeals before the Supreme Court in order to clarify diffuse aspects of the May STC of 2.017.

And it seems that, little by little, the lights are surpassing the shadows; and this from the ruling of the 9 Supreme Court of July of 2.018, from which the Supreme Court rejects outright the jurisprudential thesis that was considering that any liquidation derived from the Capital Gains Tax (even if there were profits) should be considered null

The Supreme Court establishes that only claims can be made the return of the surplus value in cases where there have been losses (either by transmitting a property, or by inheriting it) and the taxpayer can prove it.

On the contrary, it does accept the Supreme Court that in the event that the seller (or heir) can not prove that the transfer of the land has not increased its value, in that case must liquidate the surplus value; that is, if it can be demonstrated that the transmission has occurred without there having been an increase in the value of the land, in that case it will not be appropriate to liquidate the surplus value.

For the Supreme Court, it is the taxpayer who must prove that there has been no increase in the value of the land, using any principle of proof for this. After this test provided by the taxpayer, it must be the Administration that rejects this test principle against the subject. That is, the Administration in this case must have an active attitude to counteract the test of the individual and not be excused simply in the fact that the individual has not proven the inexistence of economic benefit.

We hope that this Supreme Court Judgment will give enough light to counteract the great legal uncertainty that has arisen in this matter; and it would be much more helpful if, once and for all, the Legislative Power were to comply with the mandate of the Constitutional Court and approve the modification of the Local Treasury Law.

For the time being, and fourteen months after the Constitutional Court's Judgment, we already have a Proposed Law that follows its parliamentary course. For something one starts….


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Daniel Vigo

DiG Lawyers

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