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Constitutional Court ruling on the unconstitutionality of the tax on the increase in the value of urban land (I.I.V.T.U.).

    The Constitutional Court annuls part of the article on the value of urban land (“municipal capital gains”).

    The judgment of October 26, 2021, considers that article 107.1, second paragraph; and the articles 107.2.a. and 107.4 of the revised text of the Law of Regulating Local Tax Authorities (Legislative RD 2/2004, of March 5), because they establish an objective method for determining the taxable base of the Tax on the Increase in the Value of Urban Land which determines that there has always been an increase in the value of the land during the tax period, regardless of whether there has been such an increase and does not take into account the actual amount of that increase.

    It is a step forward in the unfair application of a tax that objectively charges the increase in the value of the land when selling the property, determining an increase in value and multiplied by the years and a coefficient determined by the municipality in which the property for sale is located, moreover this tax is collected by the same municipality.

    The ruling does not determine the abolition of this tax, but a subjective method must be determined, which establishes whether or not there has been a profit (the property has been bought at a price and sold at a higher price) or if, on the contrary, there is a loss (when buying for a price higher than that of the sale later). Therefore sellers do not have to pay when there is a loss, a specific regulation is necessary to be approved, hopefully very soon.

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