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Municipal Capital Gain declared partially Unconstitutional

The Constitutional Court has just made public the ruling that partially upholds the unconstitutionality of the Municipal Capital Gain.

The Court considered that it could be contrary to the Constitution to tax capital gains in cases in which the taxpayer proved that there had not been such an increase in value or even showing a loss as a result of the economic crisis.

The tax is levied on the manifestation of wealth that is revealed in order to transfer a property, said wealth, as the name of the tax indicates, is constituted by the increase in value experienced by the land during the period of ownership. The liquidation mechanism of this tax means that any transmission is taxed by it regardless of whether or not this increase in value was made manifest, since the taxable base is the result of applying coefficients to the cadastral value of the land at the time of the transfer based on the number of years in which the asset has remained in the taxpayer's assets. Therefore, the aforementioned articles established a fiction that did not admit evidence against which the existence of an increase in value in all transmission was presumed.

The Constitutional Court has considered the question raised, as far as the provincial norm is concerned, considering that in "in no case may the legislator establish a tribute taking into consideration acts or facts that are not exponents of real or potential wealth."

The Constitutional Court indicates that it is contrary to the principle of economic capacity contained in article 31.1 EC to tax situations in which no increase in value is shown. The Constitutional Court declares the unconstitutionality of the aforementioned articles of the provincial law in the following sense: "The precepts prosecuted must be declared unconstitutional, although exclusively to the extent that they have not planned to exclude from the tribute inexpressive situations of economic capacity due to the lack of increases in value."

This interpretation does not imply the nullity of the tax, but rather of the aforementioned articles of the regional law insofar as:

  1. They involve taxing transfers that do not show an increase in value.
  2. They do not allow taxing an increase in value other than that resulting from applying the method provided in the articles.
  3. Not admit that taxpayers provide evidence to prove that there has been no increase in value or that it is different.

The sentence does not temporarily limit its effects, although it establishes the mandate to the provincial legislator to modify the tax law in such a way as to avoid taxing situations of non-existence of increase in value.


  1. The judgment limits its effects to the provincial norm of the historical territory of Guipúzcoa, rejecting the question of unconstitutionality with respect to the Local Treasury Law because it does not apply to the assumption raised by the Donostia Court. Therefore, we will have to wait for the pending issues raised by the Courts of Barcelona, ​​Madrid and Jerez to be resolved, which will refer to the Local Finance Law, and which will foreseeably be resolved in the same sense.
  2. The judgment does not annul the tax, but rather the articles that determine the calculation of the tax base, this means that all the settlements applied by the aforementioned articles can be questioned, although the question is clearer in those cases in which it can be proven that there has been no increase in value, or even in those in which it can be proven that the increase in value is notably less than that resulting from the application of the articles declared unconstitutional. Regarding the rest of the cases, although it can be questioned for applying an unconstitutional precept, this predictably would not prevent the Administration from trying to re-liquidate since the tax has not been annulled.
  3. The practice of proof by which the inexistence of an increase in value is verified cannot be rejected, so it will be necessary to provide evidence in order to prove the inexistence of the increase in value.

A priori, they are susceptible to questioning all capital gains in which it could be proven that there has been no increase in value or that, even if it occurs, is significantly lower than that which has been liquidated. It is highly recommended to raise the challenge as soon as possible as long as the unconstitutionality issues raised in relation to the Local Tax Law applicable to the rest of the national territory are resolved in case the sentence limits its effects, so that it only allows the annulment of settlements contested before the publication of the sentence.


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