The Constitutional Court extends the cancellation of capital gains to all of Spain

Text of the ruling and return request model

The Plenary Session of the Constitutional Court, composed of Mr. Juan José González Rivas, President, Mrs. Encarnación Roca Trías, Mr. Andrés Ollero Tassara, Mr. Fernando Valdés Dal-Ré, Mr. Santiago Martínez-Vares García, Mr. Pedro José González-Trevijano Sánchez, Mr. Antonio Narváez Rodríguez, Mr. Ricardo Enríquez Sancho, Mr. Cándido Conde-Pumpido Tourón and Mrs. María Luisa Balaguer Callejón, Magistrates, have pronounced the following

IN THE NAME OF THE KING SENTENCE

In the matter of unconstitutionality no. 4864-2016 promoted by the Contentious-Administrative Court no. 1 of Jerez de la Frontera, in relation to art. 107 of the consolidated text of the Law Regulating Local Treasury, approved by Royal Legislative Decree 2/2004, of March 5. The State Attorney, representing the Government of the Nation, and the State Attorney General have appeared and made allegations. The Speaker was Judge Andrés Ollero Tassara, who expressed the opinion of the Court.

I. Background

1. On September 14, 2016, a document from the Contentious-Administrative Court No. was entered in the general registry of this Constitutional Court. 1 of Jerez de la Frontera (recourse no. 174/2015), which is accompanied, together with the testimony of the corresponding procedure, the Order of July 25, 2016, by which it was agreed to raise a question of

unconstitutionality in relation to art. 107 of the consolidated text of the Law regulating Local Treasury, approved by Royal Legislative Decree 2/2004, of March 5, for alleged violation of the principle of economic capacity (art. 31.1 CE).

2. The factual background of the raising of the present question of unconstitutionality is, succinctly stated, the following:

a) The commercial entity “Rentas y Vitalicios, S.L.”, dedicated to real estate development, acquired a series of lands in 2003 on which it proceeded to build 73 homes. These would then be awarded to the financial entity “Unicaja Banco S.A.U.” for 50% of its appraised value, except one that was for a higher value, through mortgage foreclosure procedure no. 85/2004, followed before the Court of First Instance no. 3 of Jerez de la Frontera.

b) As a consequence of the previous transfers, on July 14, 2014, the Jerez de la Frontera City Council issued a series of settlements for the concept of tax on the increase in the value of urban land.

c) When the executed company considered that there had not been an increase in the value of the land, against the previous liquidations it filed the corresponding appeals for replacement, which were dismissed by Decree of the Deputy Mayor, Delegate of Economy, dated October 21, 2014 , arguing that “the legislator developed these regulatory regulations knowing that a positive quota could always be obtained.”

d) Promoted contentious-administrative appeal (no. 174/2015) against the previous Decree before the Contentious-administrative Court no. 1 of Jerez de la Frontera, once the corresponding procedure was concluded, by means of an order dated June 8, 2016, the parties and the Public Prosecutor’s Office were notified so that they could allege the possible unconstitutionality of the objective valuation standard established in the art. 107 of the consolidated text of the Law Regulating Local Treasury, approved by Royal Legislative Decree 2/2004, of March 5; but only to the extent that it imposes non-real consequences, contrary to the principle of economic capacity (art. 31.1 CE).

e) Once the allegations procedure was completed, both the appellant in the process a quo, by means of a document registered on June 22, 2016, and the Public Prosecutor’s Office, by report of October 24, 2016, did not oppose the approach of the question. For its part, the Jerez de la Frontera City Council, also in writing dated June 22, 2016, opposed the approach.

3. In the legal basis of the Order raising the question of unconstitutionality, the proposing judicial body, after specifying the factual background, defines the way of quantifying the increase in the value of the land in accordance with the provisions of Royal Legislative Decree 2 /2004 and highlight the scope of the principle of economic capacity of art. 31.1 CE in constitutional doctrine (STC 194/2000), considers that the contested administrative resolution clearly reveals the situation raised. Well, it recognizes that the aforementioned Royal Legislative Decree 2/2004 only allows the existence of positive quotas as a result of the tax on the increase in the value of urban land. According to the Court promoting the matter, art. 107 of the aforementioned legal text contains a rule for determining increases in value that is imperative in nature, without there being any provision that provides for the possibility of using another alternative method of quantifying municipal capital gains.

Thus, according to the judicial body, the appellant entity in the process a quo acquired some land at a time of rising prices in the real estate market, adjusting the value statements in the municipality to such prices, and then, in a situation of substantial and sustained drop in prices, transmit them in foreclosure. However, the questioned provision does not contemplate the assumption of an undervaluation in the sale of real estate, always determining an increase in value for which to pay taxes, which seems to contravene the doctrine of the Constitutional Court on the principle of economic capacity, as a starting requirement. of all tax benefits.

In short, the law attributes, in any case, a positive result of increased value due to the application of rules for determining the tax base that cannot be applied, given their imperative nature. It does not contemplate the possible existence of an undervaluation at the time of the transfer of the properties, which would make the tax provision depend on situations that are not expressive of economic capacity and, consequently, it would be subjecting non-potential manifestations of wealth to taxation. , but non-existent or fictitious.

4. By order dated January 31, 2017, the Plenary Session of this Court agreed to admit the issue raised for processing and, in accordance with the provisions of art. 10.1.c) LOTC, reserve knowledge of the matter for itself, transferring the actions received, as established in art. 37.3 LOTC, to the Congress of Deputies and the Senate, through their Presidents, to the Government, through the Minister of Justice, and to the Attorney General of the State, so that, within the non-extendable period of fifteen days, they could appear in the process and formulate the allegations they deem appropriate, as well as publish the initiation of the matter in the “Official State Gazette” (which took place in BOE No. 34, of February 9).
5. In writing registered in this Court on February 16, 2017, a communication was received from the President of the Senate by which the agreement of appearance of this Chamber in the procedure was transferred to this Court and for offering its collaboration for the purposes of the art. 88.1 LOTC. Subsequently, in writing recorded on the following 17th, another communication was received from the President of the Congress of Deputies in which this Court was also informed of the agreement to appear by this Chamber in the procedure and for offering its collaboration for the purposes. of art. 88.1 LOTC, with referral to the Directorate of Studies, Analysis and Publications, and to the Legal Department of the General Secretariat.

6. The State Attorney presented his brief of allegations in the registry of this Court on February 28, 2017. In this document, and prior to the analysis of the unconstitutionality defects attributed to the questioned norms, he makes two preliminary clarifications. : i) Art. 107 LHL questioned, as the judicial body promoting the issue itself recognizes, would not be unconstitutional in any case, but only to the extent that there was no real or certain increase in value; For said article to be contrary to the Constitution, it must be assumed that in the specific case the said assumption has been demonstrated: that the increase in the value of the land is neither real nor certain. ii) Even though the aforementioned art. 107 LHL, in its entirety, however, since there is a liquidation for the transfer in foreclosure of two properties, section 2, subsections b), c) and d) of that provision should be left out of the approach, since they would not be relevant to adopt a resolution in the process.

Once the above details have been made, the State Attorney goes on to analyze the reported unconstitutionality of art. 107 LHL. To this end, it points out that this provision, in the wording given to it by Law 51/2002, establishes that the tax base will be constituted by the “increase in the value of the land” revealed at the time of accrual and experienced throughout the period. over a maximum period of twenty years; unlike the wording prior to Law 51/2002, which stated that the tax base was the “real increase in the value of the land.” For the State Attorney, before the reform, the legislator had configured the determination of the real increase through the use of a valuation rule that could only offer a referential value; which justified that a taxpayer could challenge the assessment if he could prove the absence of a taxable increase. On the contrary, after the reform, since the term “real” has been eliminated, nothing is being conditioned. Even if it is evident “through a cadastral review of the land” that the taxpayer has obtained a handicap, there will always be a potential taxable income; so the principle of economic capacity would always be safe. The basis of the tax is not to tax the “real” increase caused by the difference in sales and purchase prices, but rather the potential wealth, that is, the increase in the value of the land experienced by the urban planning action of the municipality in which it is located, returning to the community part of the benefit obtained based on art. 47 CE, which provides that “the community will participate in the capital gains generated by the urban planning action of public entities.”

For the State Attorney, the value of the land to be taken into consideration is the one determined at the time of the transfer for the purposes of the property tax, that is, the cadastral value, the legislator having thus assumed objective criteria for the determination. of the taxable base of the tax, which do not take into account particular or subjective circumstances. In this sense the art. 107 of the Local Treasury Law provides that the tax base of the tax will be determined by applying the value of the land for the purposes of the real estate tax, that is, the cadastral value. This is a percentage that, in turn, is the result of multiplying the coefficient established by the city council, within the legal limit, by the number of years of generation of the increase. In this way, the amount of the tax increases depending on the number of years that have elapsed between the acquisition and transfer of the land (with a maximum of 20 years); always with total independence of the real gain obtained with the transmission of the land. Although the legislator could choose between various formulas to determine the increase in value of the land, such as, for example, the transfer price or the market value, he nevertheless chose to calculate the increase in value in relation to the cadastral value. He preferred to establish a rule for determining the tax base that is neither presumptive nor evidentiary, but rather objective (dissociated from reality), which simplifies its determination, although it may give rise to a base that is lower or higher than the actual increase in land.

It is true, then, for the State Attorney, that in a situation like the current one, in which property prices have fallen compared to previous years and in which the owner of a property may be forced to sell it for a price lower than the acquisition price, it may happen that, despite having obtained an economic loss, for municipal tax purposes an increase in the value of the land is appreciated. But this is not contrary, in his opinion, to the principle of economic capacity of art. 31.1 EC. During the previous decades and especially in the years of the so-called “real estate boom”, the market value of properties increased well above the cadastral values, while the municipal tax was also taxed based on the cadastral value and not of the market value. Of course, to alleviate the negative effects of the real estate market crisis, the tax regulations have provided for two measures that City Councils can apply: on the one hand, a reduction in the cadastral value of up to 60 percent of its value during the five years following its review; on the other, the updating, even downwards, of the cadastral values.

Since the cadastral value of the real estate is taken into account to calculate the tax base of the tax on the increase in the value of the land (as is also the base of the tax on real estate and the value that is taken as a reference in the tax on personal income and wealth tax), the State Attorney emphasizes that if it is considered that the cadastral values are poorly determined, this is not a problem of economic capacity, but of articulating the mechanisms provided for in the current regulations to challenge those values.

7. The State Attorney General presented his brief of allegations in the registry of this Court on March 16, 2017, considering that he should declare that arts. 107.1 and 2.a), and 110.4 of the consolidated text of the Law Regulating Local Treasury, approved by Royal Legislative Decree 2/2004, of March 5, are unconstitutional and void, but “only to the extent that they subject taxation situations of non-existence of increase in value”, by not allowing Local Corporations to dispense with the legally established calculation rule, even if in the transfers of urban land there is an undervaluation at the time of transfer.

After specifying the factual background of the raising of the issue, the content of the questioned provision, compliance with the procedural requirements, the doubts of constitutionality expressed by the body promoting the issue and the structure of the tax on the increase in the value of the land of an urban nature, the State Attorney General emphasizes that this Court has issued SSTC 26/2017, of February 16, and 37/2017, of March 1, in relation, respectively, to arts. 1, 4 and 7.4 of Foral Regulations 16/1989, of July 5, and 46/1989, of July 19, regulating the Tax on the Increase in the Value of Urban Land in the historic territories of Gipuzkoa and Álava . It has declared them unconstitutional and void, but “only to the extent that they subject situations of non-existence of increase in value to taxation.” Well, since the wording of the sections of the precepts questioned in the present case is identical to that of the regional regulations declared unconstitutional and since the doubts expressed by the judicial body are also identical to those already analyzed in the cited Sentences, It is also necessary to declare the unconstitutionality and nullity of art. 107.1. and 2 a) of the Law Regulating Local Treasury, “only to the extent that situations of non-existence of increase in value are subject to taxation.”

Finally, the State Attorney General points out that even though the judicial body has limited itself to questioning art. 107 of the Local Finance Law, in the hearing order prior to raising the issue, art. 110.4 of the same Law, which prevents taking into consideration the cases of decrease in value, having been the subject of the allegations of the parties and the Public Prosecutor’s Office. However, the obligation of Local Corporations to comply with the tax rules “without admitting evidence to the contrary” is a consequence of the wording of art. 110.4, which is why, in the cited Sentences, art. 7.4 of the provincial regulations in question. Although in the subsequent Order of approach there is no reference to the aforementioned art. 110.4, art. 39.1 LOTC allows the declaration of unconstitutionality to be extended, “by connection or consequence”, to other provisions of the same Law, which should occur in this case as there is an intimate connection between the rules for determining the tax base and that art. 110.4, which prevents Local Corporations from disregarding the legally established calculation rule, even when there has been an undervaluation of the value of the land at the time of transfer.

For all these reasons, the State Attorney General considers that the unconstitutionality and nullity of the arts should be declared. 107.1, 107.2 a) and 110.4 of the consolidated text of the Law Regulating Local Treasury, approved by Royal Legislative Decree 2/2004, of March 5.

8. By letter dated January 24, 2017, Judge Juan Antonio Xiol Ríos communicated his willingness to abstain from hearing this issue of unconstitutionality, as it is understood to be included in section 10a of art. 219 LOPJ (having indirect interest in the cause). By ATC 13/2017, of January 31, the Plenary Session of this Court agreed to consider the abstention made justified, definitively separating it from knowledge of the issue and all its incidents.
9. In writing dated May 11, 2017, Judge Alfredo Montoya Melgar announced his intention to abstain from hearing this issue of unconstitutionality, as it is understood to be included in section 10a of art. 219 LOPJ (having indirect interest in the cause). By ATC of May 11, 2017, the Plenary Session of this Court agreed to consider the abstention made justified, definitively separating it from knowledge of the issue and all its incidents.
10. By order of May 9, 2017, the 11th of the same month and year was set for deliberation and voting on this Judgment.

II. Legal foundations

1. The Contentious-Administrative Court no. 1 of Jerez de la Frontera has raised an unconstitutionality issue in relation to art. 107 of the consolidated text of the Law Regulating Local Treasury, approved by Royal Legislative Decree 2/2004, of March 5 (hereinafter, LHL), for possible infringement of the principle of economic capacity (art. 31.1 CE).

Before beginning to respond to the doubt that arises in the present constitutional process, we must specify that, as the State Attorney points out, even when art. 107 LHL in its entirety, to the extent that the disputed liquidation in the process a quo derives from the onerous transfer of some land, letters b), c) and d) of its section 2 must be left out of the object. They include the rules for determining the value of land in the constitution and transmission of real rights of enjoyment limiting ownership [letter b)]; in the constitution or transfer of the right to raise one or more floors on a building or land, or the right to carry out construction underground without implying the existence of a real surface right [letter c)]; and in forced expropriations [letter d)].

Consequently, since it is not applicable to the factual situation that gives rise to the present constitutional process, given that the judicial body has not established its applicability nor the extent to which the decision of the process a quo depends on the validity of the sections b), c) and d) of art. 107.2 LHL, these must be excluded from the subject of the question.

2. Considers the Contentious-Administrative Court no. 1 of Jerez de la Frontera that the law attributes, in any case, a positive result (an increase in value) due to the application of rules for determining the tax base that cannot fail to be applied (given their imperative nature), not contemplating the possible existence of an undervaluation at the time of the transfer of the properties. This would make the tax provision depend on situations that are not expressive of economic capacity and, consequently, subjecting to taxation manifestations of wealth that are no longer potential, but non-existent or fictitious.

The State Attorney maintains, however, that the “real value” is confused with the “cadastral value”, since the tax is not intended to tax real increases, since the legislator has chosen to calculate the increase in value derived from the transmission of a urban real estate in an objective manner, without taking into account the circumstances of the specific case. This allows even those who transfer a property for a price lower than the acquisition price, having obtained an economic loss, to have an increase in value subject to taxation. In his opinion, the fact that the transfer demonstrates a handicap does not make the tax contrary to the principle of economic capacity of art. 31.1 CE and, therefore, unconstitutional; because with the very fact of the transfer an economic capacity susceptible to tax is revealed.

The State Attorney General, based on SSTC 26/2017, of February 16, and 37/2017, of March 1, relating to arts. 1, 4 and 7.4, respectively, of Foral Regulations 16/1989, of July 5, and 46/1989, of July 19, regulating the Tax on the Increase in the Value of Urban Land in the Historical Territories of Gipuzkoa and Álava, considers that the unconstitutionality and nullity of the arts should be declared. 107.1, 107.2 a) and 110.4 LHL, “only to the extent that they subject situations of non-existence of increase in value to taxation”; taking into account that the wording of the precepts now questioned is identical to that declared unconstitutional in those Sentences.

3. As the State Attorney General points out, we have recently ruled on a question of constitutionality substantially identical to the one now raised in SSTC 26/2017 and 37/2017. In these Sentences we came to the conclusion that the treatment given by the aforementioned Provincial Norms “to the cases of non-increase or even decrease, in the value of urban land, lacked any reasonable justification, by imposing the taxpayers of the tax the obligation to bear the same tax burden that corresponded to the situations of increases derived from the passage of time, with which factual situations inexpressive of economic capacity were being subjected to taxation contrary to the principle guaranteed in art. 31.1 CE» (SSTC 26/2017, FJ 3; and 37/2017, FJ 3).

In effect, we declare in both judgments that, being constitutionally admissible for “the legislator to establish taxes that, without ignoring or contradicting the principle of economic capacity, are oriented toward the fulfillment of purposes or the satisfaction of public interests that the Constitution advocates or guarantees.” “, it is enough that “said economic capacity exists, as real or potential wealth or income in the generality of the assumptions contemplated by the legislator when creating the tax, so that that constitutional principle remains safe”, this must be done without in any way case can “establish a tax taking into consideration acts or facts that are not exponents of real or potential wealth, or, what is the same, in those cases in which the economic capacity taxed by the tax is, no longer potential, but non-existent, virtual or fictitious” (SSTC 26/2017, FJ 3; and 37/2017, FJ 3). For this reason we specify immediately that, even though “the legislative policy option aimed at subjecting increases in value to taxation by resorting to a system of objective quantification of potential economic capacities is fully valid, instead of doing so based on the effective economic capacity revealed”, however, “it is one thing to tax a potential income (the increase in value that presumably occurs with the passage of time in all land of an urban nature) and quite another to subject a property to taxation. unreal income» (STC 26/2017, FJ 3).

It turns out, then, that even though in accordance with its normative regulation, the object of the tax analyzed is the “increase in value” that the land could have experienced during a given time interval, which is quantified and subject to taxation from the moment of its transmission, the lien, however, is not necessarily tied to the existence of that “increment” but to the mere ownership of the land for a computable period of time that ranges between one (minimum) and twenty years (maximum). Consequently, it is enough to be the owner of land of an urban nature for this circumstance to be linked, as an inseparable and irrefutable consequence, to an increase in value subject to taxation that is quantified automatically, by applying it to the value of that land. for the purposes of the real estate tax at the time of the transfer, a fixed percentage for each year of ownership, regardless not only of the real amount of the same, but of the very existence of that increase (SSTC 26/2017, FJ 3; and 37/2017, FJ 3). However, it seems clear that the fact that the origin of the tax obligation was made to depend, then and also now, on the transfer of land, “could be a necessary condition in the configuration of the tax, but, in no way, It can be established as a sufficient condition in a tribute whose object is the “increase in value” of a piece of land. To the fact of this transmission we must add, therefore, the necessary materialization of an increase in the value of the land, an exponent of a real or, at least, potential economic capacity. However, when this increase in the value of the transferred land has not occurred, the economic capacity allegedly taxed ceases to be potential and becomes unreal or fictitious, thereby violating the principle of economic capacity (art. 31.1 CE)” (STC 37/2017, FJ 3).

Judging that provincial regulation, we consider that “the questioned precepts pretend, without admitting evidence to the contrary, that by the sole fact of having been the owner of an urban land for a certain period of time (between one and twenty years), it is revealed, in In any case, an increase in value and, therefore, an economic capacity susceptible to taxation, preventing the citizen from fulfilling his obligation to contribute, not in any way, but exclusively “in accordance with his economic capacity” (art. 31.1 CE). ». In this way, when the legislator establishes the fiction that an increase in value susceptible to tax has taken place at the time of any transfer of land due to the sole fact that the owner has kept it in his assets during a given temporal interval, ignoring those In cases in which this increase has not occurred, “far from subjecting to taxation an economic capacity susceptible to tax, it would be making them tax on non-existent wealth, in open contradiction with the principle of economic capacity of the aforementioned art. 31.1 CE» (SSTC 26/2017, FJ 3; and 37/2017, FJ 3). We must not neglect that “the economic crisis has turned what could be an isolated effect – the non-existence of increases or the generation of decreases – into a generalized effect, which the regulatory regulation of the tax must necessarily address”, since the specific dysfunctions that it generates violate “the requirements derived from the principle of economic capacity” (SSTC 26/2017, FJ 4; and 37/2017, FJ 4).

For the same reasons we must conclude here that the treatment that the questioned precepts of the LHL give to the assumptions of no increase, or even a decrease, in the value of urban land, tax a fictitious income to the extent that, By imposing on taxpayers the obligation to bear the same tax burden that corresponds to situations of increases derived from the passage of time, it is subjecting to taxation situations that are inexpressive of economic capacity, which frontally contradicts the principle of economic capacity. which guarantees art. 31.1 EC. Consequently, the questioned precepts must be declared unconstitutional, although only to the extent that they have not provided for excluding from the tax situations that do not express economic capacity due to the lack of increases in value (SSTC 26/2017, FJ 3; and 37/2017, FJ 3).

4. The conclusion reached above is not saved by any of the two measures invoked by the State Attorney that the City Councils could adopt in accordance with the tax regulations: on the one hand, the reduction of the cadastral value by up to 60 percent during the five years following its review; on the other, the updating, even downwards, of the cadastral values.

a) It is true that City Councils can reduce the cadastral value of real estate that has been subject to modification as a result of a general collective valuation procedure, on an optional basis, by up to 60 percent, thereby causing, as immediate effect, a reduction in the amount of the questioned tax. In this sense the art. 107.3 LHL authorizes the Town Councils to introduce – on an optional basis – a reduction of up to 60 percent in the cadastral value of the land when it has been modified as a result of a general collective valuation procedure (this same reduction was mandatory until year 2012; art. 4 of Royal Decree-Law 12/2012, of March 30, made it optional).

According to the above, not only in those cases in which the City Councils have not foreseen that reduction, the situation that is considered unconstitutional would not be cured, but also in those others in which they could have foreseen the aforementioned reduction, the only thing What would be achieved, if an increase was not estimated, would be to reduce its amount, but not avoid it, which would in no way cure the violation of the principle of economic capacity of art. 31.1 EC.

b) It is also true that the cadastral values (those used to determine the increase in value subject to taxation) can be updated, even downward, by application of the coefficients provided for in the general budget laws, achieving with this, eventually, the reduction of the amount of the questioned tax. In effect, the state legislator is aware that the circumstances of the real estate market have changed as a consequence of the economic crisis and, therefore, that the cadastral values from which the increase in the value subject to taxation is determined have been negatively affected, introduced – since 2014 – the possibility of applying coefficients for updating the cadastral value that not only serve, in some cases, to increase it, but also, in other cases, to reduce it. Unlike what was happening until 2013, when a single coefficient for updating the cadastral value of real estate was applied, art. 16 of Law 16/2012, of December 27, which adopts various tax measures aimed at consolidating public finances and promoting economic activity, reworded art. 32 of the consolidated text of the Real Estate Cadastre Law, approved by Royal Legislative Decree 1/2004, of March 5, to provide for the possibility of updating the cadastral values of urban real estate, at the request of the City Councils, provided that have revealed substantial differences between the market values and those that served as the basis for determining the current cadastral values, and provided that at least five years have elapsed since the entry into force of the cadastral values derived from the previous valuation procedure. general collective.

Traditionally, a single coefficient was applied to update the cadastral value of real estate. However, after the modification carried out by art. 16 of Law 16/2012, of December 27, the general budget law of the State has been introducing coefficients for updating cadastral values for their adaptation to the real estate market, which can be upwards or downwards. The reduction provided for in the different budget laws for those properties whose value statements were approved as of 2005 attempts to adapt the cadastral value to the value of the real estate market, for the purposes of the real estate tax. In this way, to the extent that the cadastral value assigned to the land at the time of accrual is the fundamental parameter to determine the increase in value that it has experienced over a maximum period of 20 years (art. 107 LHL), There is no doubt that the updating of that value, when it is downwards, through the application of the coefficient provided for in the corresponding general budget law of the State (in the event that the City Council has requested it from the General Directorate of the Cadastre ), will cause as an immediate consequence the reduction of the tax base (increase in value) in the disputed tax. However, the reduction of the increase attributable to the taxpayer, in the event that an increase is not estimated, would again only serve to reduce its amount, but not to avoid it, in open contradiction with the principle of economic capacity of art. 31.1 EC.

5. Before pronouncing the ruling to which this Judgment leads, a series of final clarifications must be made regarding its scope:

a) The tax on the increase in the value of land is not, in general, contrary to the Constitutional Text, in its current configuration. It is only in those cases in which it subjects to tax situations that do not express economic capacity, that is, those that do not show an increase in the value of the land at the time of transfer. Therefore, arts must be declared unconstitutional and null. 107.1 and 107.2 a) LHL, “only to the extent that they subject situations that do not express economic capacity to tax” (SSTC 26/2017, FJ 7; and 37/2017, FJ 5).

b) As the State Attorney General points out, although the judicial body has limited itself to questioning the constitutionality of art. 107 LHL, we must extend our declaration of unconstitutionality and nullity, due to connection (art. 39.1 LOTC) with arts. 107.1 and 107.2 a) LHL, to art. 110.4 LHL, taking into account the intimate relationship between this last mentioned precept and the valuation rules provided for in those, whose existence is not explained autonomously but only by its connection with it, which “does not allow accrediting a result different from the resulting from the application of the valuation rules it contains» [SSTC 26/2017, FJ 6; and 37/2017, FJ 4 e)]. Consequently, art. 110.4 LHL, by preventing taxable persons from being able to prove the existence of a situation without expression of economic capacity (SSTC 26/2017, FJ 7; and 37/2017, FJ 5).

c) Once expelled from the legal system, ex origine, arts. 107.2 and 110.4 LHL, in the terms indicated, it must be indicated that the way of determining the existence or not of an increase susceptible to being subject to taxation is something that only corresponds to the legislator, in his freedom of normative configuration, from the publication of this Judgment, carrying out the pertinent modifications or adaptations in the legal tax regime that allow arbitrating the way of not subjecting to taxation the situations of non-existence of increase in value of urban land (SSTC 26/2017, FJ 7 ; and 37/2017, FJ 5).

FAILED

In light of all of the above, the Constitutional Court, BY THE AUTHORITY CONFERRED TO IT BY THE CONSTITUTION OF THE SPANISH NATION,

Has decided

Estimate the question of unconstitutionality no. 4864-2016 and, consequently, declare that arts. 107.1, 107.2 a) and 110.4, all of them from the consolidated text of the Law Regulating Local Treasury, approved by Royal Legislative Decree 2/2004, of March 5, are unconstitutional and void, but only to the extent that they subject taxation situations of non-existence of value increases.

Publish this Judgment in the “Official State Gazette”. Given in Madrid, on May 11, two thousand and seventeen.