The Tax on the Increase in the Value of Urban Land (hereinafter, “IIVTNU”), known as the Municipal Capital Gains, is that tax that taxes the increase in the value of the land for a maximum period of 20 years that is established manifest at the time of its transmission.
In recent years, it has been one of the taxes that has gained the greatest prominence after being the subject of various jurisprudential pronouncements. Recently, the Supreme Court has surprised with its new criteria regarding the valuation of the land and the burden of proof, through the two rulings set out below:
• Ruling 323/2021 of the Supreme Court of February 2, 2021
The IIVTNU is a tax that taxes the increase in value experienced by the land, taking as reference its cadastral value at the time of its acquisition and transfer, and must not exceed in any case the market value of the property.
In the appeal that resolves said ruling, the appellant alleges that there has not been a true increase in the value of the land given that the price obtained with the transfer is much lower than that paid for its acquisition, which is why liquidation is not appropriate.
For its part, the Administration defends that, taking into account the cadastral value of the property at the time of transfer, while that corresponding to the construction decreased, the value of the land suffered a significant increase, deducing from this that the capital loss obtained with The transfer is not due to the loss of value of the land but to the loss of value of the construction.
Given this fact, the High Court refers to several rulings, among them, to Sentence No. 305/2018 of the Superior Court of Justice of Aragon, in which it concludes that the fact that the cadastral value of the land may have been increased does not It is an absolute indication of an increase in value or capital gain, since this will depend on whether it can be demonstrated that the cadastral value effectively corresponds to the market value. Furthermore, the Court continues to argue that what is truly relevant is that it can be determined that the market value of the land has increased and not the cadastral value, since these are values that do not have to coincide.
The Supreme Court maintains that the Administration did not solidly argue for this increase in the land, since it did so only taking as a reference the evolution of the cadastral value of the land and attributing the decrease in the market value of the property as a whole to the decrease in the cadastral value of the property. construction.
Through this ruling, the Supreme Court ends up concluding that, since it is the taxpayer who must prove in all cases the non-existence of an increase in the value of the land for consideration, any means of proof used will be valid for this purpose, including that which demonstrates that the cadastral value is different from the market value, as long as it has provided means of proof that are more than sufficient to prove this fact (see, reports from independent third parties), transferring to the Administration, where appropriate, the burden of distorting this fact.
• Ruling 430/2021 of the Supreme Court of February 4, 2021
In this ruling, the Supreme Court addresses the question of how to prove the value of the land when it is not broken down in the transfer deed, with only the total price paid for the sale of the property as a whole (construction + land) appearing.
In these cases, when determining the value of the land at the time of transfer, the Town Councils have been resorting to the method consisting of calculating the proportion that the cadastral value of the land represented on the date of transmission with respect to the total cadastral value of the real estate.
This is usually much more beneficial for Local Corporations, especially in cities that have land values that have increased in recent years.
In the case dealt with by the High Court, the taxpayer had determined the value of the land after applying to the sale price established in the deed, the proportion between what was paid for the purchase of the land at the time and the total cost of the purchase. resulting promotion. Thus, a percentage of the land was 19.92%.
On the other hand, according to the method followed by the City Council, the sale price of the land was determined after applying to the total sale price established in the deed, the proportion existing between the cadastral value of the land and the total cadastral value at the time of the transmission. In this way, the percentage of the land was 32.28%.
Well, the High Court rules on this controversy and ends up arguing that, although the method used by the City Councils is valid as long as it is included in various legal regulations of a tax nature and is treated of an objective method, this does not imply that it is the only existing method to determine the value that the land represents in the transfer since this would represent an obstacle for the taxpayer by preventing him from proving for himself and any legally valid means of proof the true value of the land at the time of transfer.
In other words, only in those cases in which it is not possible to attribute a value to the land by any other means of proof suitable in law, will it be appropriate to apply said method. One should not make the mistake of considering it as an exclusive method or imposing it over any other legitimately used by the taxpayer, which must be assessed by the judicial body.
Tax Department.
Laura Castellanos