The system for calculating the municipal capital gains tax has been declared unconstitutional.
The Tax on the Increase in Value of Urban Land (better known as the municipal "capital gains tax" paid on the transfer of real estate) is calculated on the basis of mathematical rules that do not take into account the actual gain or loss produced in the transfer.
As a result, the Constitutional Court has declared that this form of calculation is unconstitutional and null and void, whether the transfer of the property has generated a gain or a loss, and the reasoning behind this claim is as simple as the fact that our constitution only allows taxes that are levied on income or profit generated.
In establishing the consequences of the ruling, the court has considerably limited the possibilities for taxpayers to act, preventing the possibility of a challenge as a consequence of the declaration of unconstitutionality:
- If the capital gain was paid by means of a self-assessment, it will not be possible to rectify it or request a refund after the date of the judgment, even if the four years after which the self-assessment becomes final have not elapsed.
- If it was the municipality that paid the capital gain, it will not be possible to challenge it after the date of the judgement.
At Confialia we are studying whether we can file an appeal before the publication of the ruling or claim those settlements that are not yet final. We will keep clients affected by this measure informed.