The Court of Cassation has clarified how judges and Supreme Court bodies should apply notable constitutional rulings to tax assessments, specifically addressing capital gains taxes tied to land value increases. The ruling examines how temporary effects from a Constitutional Court decision in 2021 influence the tax base used for capital gains computations and the way those effects should be applied in ongoing cases.
The Supreme Court reviewed a dispute brought by Pontevedra County Council against a contentious administrative court decision that annulled the base used to calculate capital gains tax. The central issue was whether the temporary restraint on the effects of the constitutional ruling should extend to the tax base used for capital gains. The court’s analysis centers on aligning the tax treatment with the Constitutional Court’s 2021 guidance while ensuring due process and consistency in tax assessments.
The Supreme Court concluded that a tax settlement which is not appealed before the Constitutional Court’s unconstitutionality declaration becomes a settled matter. This follows the Constitutional Court’s own reasoning in its October 26, 2021 decision. In such a consolidated scenario, the tax treatment remains unaffected by the declaration of unconstitutionality, making it impermissible to annul the settled assessment based on the later ruling. [attribution: Constitutional Court, 2021]
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The Third Chamber of the Court of Cassation examined the scope and basis of the Constitutional Court’s authority to set the temporary effects of rulings that declare norms unconstitutional. It noted that the law governing the Court of Guarantee permits decisions to be published before the mandatory publication in the Official State Gazette, and it asserted that the limitation on consolidated cases can be understood only as a decision made within the Constitutional Court’s own powers and responsibilities. The judiciary and public authorities should respect this limitation and apply it in their own practice. [attribution: Constitutional Court, 2021]
Judges of the Supreme Court clarified that, in these circumstances, tax assessments can only be annulled by relying on other constitutional decisions that have declared norms unconstitutional. The ruling does not retroactively negate temporary effects related to the liquidation of real estate transfers when profits are absent or when tax collected exceeded the actual gains. Any argument other than the declaration that the relevant sentence is unconstitutional would not justify altering the temporary effects. [attribution: Constitutional Court, 2021]
With this decision, a principle is set for taxpayers who are within the period to challenge capital gains liquidations as of the date of the unconstitutionality declaration but have not yet formalized their objection. Courts have previously issued divergent opinions in similar contentious-administrative cases, but the new criterion provides a unified approach to such challenges. [attribution: Constitutional Court, 2021]