Tax on increase in urban land value: determinations by the courts and the DGT on timing effects of constitutional court judgment voiding the tax

A constitutional court judgment delivered on October 26, 2021 held to be unconstitutional and rendered null and void certain provisions in the legislation on the tax on increase in urban land value (see our alert dated November 3, 2021). The court determined, however, that any assessments or self-assessments that had not been challenged on the delivery date of the judgment could not be reviewed. The judgment was delivered on October 26, although not published in the Official State Gazette (BOE) until November 25, 2021.

Royal Decree-Law 26/2021 of November 8, 2021 amended the legislation on the tax to adapt it to the Constitutional Court’s case law (see our alert dated November 9, 2021). This decree-law, which was published in the Official State Gazette (BOE) on November 9, 2021 and entered into force on November 10, 2021, did not give any retroactive effect to the amendment of the legislation.

A raft of questions have since been emerging in relation to the restriction on the timing effects of that judgment and the entry into force of the new royal decree-law, which are now being answered by the courts and the Directorate General for Taxes (DGT). We discussed a few of the determinations on this subject in our 2022 February Newsletter. Recently, new determinations have been issued with the following findings:

i. New legislation is not retroactive

• The Catalan High Court has rejected the ability to replace assessments issued under the rules on determining the taxable amount in effect before the new legislation, with others calculated under the new legislation. In other words, the new royal decree-law cannot be applied retroactively to taxable events that occurred before its entry into force.
• The DGT, for its part, has analyzed a case in which the taxpayer had not filed the necessary return for a taxable event that occurred in June 2021 (in other words, before the Constitutional Court’s judgment) because it had requested a one-year deferral for filing it, which had been accepted by the tax authorities.
             
  The DGT recalled that the Constitutional Court prohibits the tax from being charged under articles held unconstitutional. Therefore, although the taxpayer will be required to file a return, the tax will not have to be paid.

ii. Effective date of the constitutional court judgment

Valencia Judicial Review Court no 3 concluded in a judgment delivered on April 5, 2022 that the limit on the timing effects contained in the constitutional court judgment must be interpreted in line with article 164.1 of the Constitution.

Its effects may therefore only start from the publication date of the judgment in the Official State Gazette (November 25, 2021) not from the date formally appearing in the judgment as the date when the decision was adopted by the court (October 26, 2021).

This interpretation could allow assessments or self-assessments of the tax to be reviewed if they were challenged between October 26 (when the judgment was issued) and November 9, 2021 (the day before the entry into force of the new legislation).