Following the publication of the Constitutional Court ruling of 26 October, which declared the Municipal Capital Gains Tax unconstitutional and therefore null and void for all purposes, the Government has rushed to publish Royal Decree Law 26/2021 of 8 November. In this way, through this new regulation, the affected articles are modified in order to adapt the Municipal Tax to the sense of the Judgment.
The new tax came into force on 10 November 2021, so that from then on, transfers will be taxed in accordance with the provisions of this new Royal Decree.
What are the main novelties?
Non-taxation in case of disability
Article 104, as amended, adds the case of non-existence of increase, which was not covered until now. In other words, in the event of a capital loss (transfer price lower than the acquisition price), no tax is payable.
Likewise, the obligation to also declare the transfer by the seller (or by the heirs and/or beneficiaries) is maintained, but only for the purpose of documenting the transfer and acquisition values that justify this non-existence of increase.
What value should I take as a reference?
What value should I take as a reference?
The one stated in the title of acquisition/transfer, and
The one verified by the Administration.
In the case of the transfer of a plot of land on which a building is located, in order to determine the value of the land, the percentage that the cadastral value of the land represents with respect to the total cadastral value will be applied to the two previous reference values.
What happens if I have acquired the property by inheritance or donation?
In cases of acquisition due to death, the value declared in the Inheritance and Gift Tax will be taken into account as a reference.
Modification in obtaining the taxable base
What calculation formulae are set out in the Royal Decree?
Two formulas may be applied:
1. Actual calculation method, consisting of taxing the gains obtained from the sale or acquisition by inheritance of a property. On this basis, a gain subject to tax will arise when the transfer price is higher than the acquisition price. On the calculated gain, the tax rate determined by each City Council will be applied, which may not exceed 30%.
2. Objective calculation method, consisting of multiplying the value of the land according to its Cadastral Value by the multiplier coefficient published in the Royal Decree.
Once these calculations have been made, the taxpayer may choose the calculation system that most benefits him/her.
Example 1 (Real Method): In 2021 a property is transferred, with a sale value of 250,000 euros, having been acquired in 2017 for 200,000 euros. The total cadastral value is 100,000 euros (70,000 euros for the building and 30,000 euros for the land).
A gain of 50,000 euros has been obtained, so the taxable base would be 15,000 euros (the result of applying, on the 50,000 euros of gain, the 30% that the land represents over the total).
If we apply the maximum tax rate of 30%, the aforementioned sale gives rise to a tax liability of 4,500 euros.
Example 2 (Objective method): following the same assumption, and taking into account the new regulation, we take as a reference the value of the land: 30,000 euros, and the period of generation of the increase is 4 years, so the taxable base of the tax would be 5,100 euros (30,000*0.17).
If we multiply the taxable base by the maximum tax rate of 30%, the tax liability for the above transfer is 1,530 euros.
In this case, the taxpayer will be taxed according to formula 2.
What has changed compared to the previous system of determination?
With the Royal Decree, the value of the land is multiplied by new coefficients, which will be approved by the local councils, and which in no case may exceed those introduced by the legislator in the new regulation.
What if I have owned the property for less than a year?
A new feature with respect to the regulation in force until now is the introduction of taxation for increases whose generation period is less than 1 year. In this way, the annual coefficient will be prorated taking into account the number of full months, i.e., without taking into account monthly fractions.
Modification of tax management (Article 110)
The power of the Town Council to determine the system of self-assessment of the tax, which will entail the payment of the resulting quota, is maintained, but as a novelty with respect to the previous regulations, the power of the Town Council to check the values declared by the interested party is added.
The scope of this verification will consist of checking that the rules have been correctly applied by the taxpayer, without being able to attribute values, bases or quotas different to those resulting from the regulations.