Spain’s Tax on the Increase in Value of Urban Land (IIVTNU), also known as municipal capital gain, is the direct tax on the increase in value of a property during the years of possession. The method of calculating the taxable amount had been changed in recent years ­– and the Spanish Constitutional Court has now declared the tax unconstitutional in certain specific cases.

26 October 2021, the Constitutional Court published an informative note (note 99/2021) which details the part of the ruling that resolves the question of unconstitutionality of the method of calculating the taxable amount of IIVTNU,  nº 4433/2020.

In the note, the  Alto Tribunal considers that  “Articles 107.1, second paragraph, 107.2.a) and 107.4 of the consolidated text of the Law regulating local finances (Legislative RD 2/2004, of March 5) are unconstitutional and null and void, because it establishes an objective method of determining the taxable base of the Tax on the Increase in the Value of Urban Land that determines that there has always been an increase in respect the value of the land during the period of taxation, regardless of whether there has been such an increase and the actual amount of that increase.”

From this, we note that the rules for calculation of the tax are not applicable in all cases, deriving the possibility of annulling any non-firm surplus value – that is, for those contested settlements under appeal and those self-assessments not verified as ‘presented’ in the last four years.

We will know all the details of the ruling when the full judgment is published in the coming days, and we will definitively confirm if the tax is unconstitutional in all cases. If this is confirmed, the door will be opened for the taxpayer to recover the IIVTNU amount paid to the municipalities for in those self-assessments presented and that are not prescribed.

We will be watching for the final resolution and we will update on the scope of the decision and the consequences of it.

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Francisco Javier Curto
Sr. Manager. Tax Support

All information contained in this publication is up to date on 2021. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.