As Spanish tax advisors, we inform you that the Court has ruled on the valid method to individualize the value of the land

As Spanish tax advisors, the Municipal Capital Gains Tax, is a tax that is levied on the increase in the value of the land, not the construction, and which is revealed as a consequence of its transfer, constitution or transfer of real rights limiting the ownership of the land. However, in many cases, when transferring a property, it is difficult to individualize the value of the land and the value of the construction of the total price of the transfer.

The Supreme Court has recently ruled on this issue, in a judgment dated February 4th, 2021, in which resolves the cassation appeal number 4847/2019.

In summary, it is a question of determining whether it is valid, in order to fix the value of the land at the time of the transfer, to resort to the existing proportion between the cadastral value of the land and the total cadastral value.

The relevance of this issue is evident since, depending on which method is used to calculate the value of the land, an increase or decrease in value will be obtained.

Faced with this situation, the Supreme Court resolves in the following terms:

  • In cases where the value of the land is unknown, it may be valid to obtain it from the method consisting of the proportion represented on the date of the transfer, by the cadastral value of the land regarding the total cadastral value of the real estate.
  • However, this method cannot be exclusive or unique, nor can it be imposed on any other means of proof admitted in law.
  • The “method” or “system” to determine the value of the land will depend on the circumstances of the specific case, since it is not the same for the taxpayer to remain completely silent on the matter, than to deploy a whole argumentative and evidentiary effort to try to demonstrate that the percentage of land, in the transfer he made, was a determined one and not the one that follows, objectively, from that method.

B Law & Tax International Tax & Legal Advisors.


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