Madrid’s Supreme Court of Justice (TSJM) ruled in favor of construction company Dragados in its dispute with Madrid City Council, concluding that the company will not owe the Construction, Installation and Construction Tax (ICIO) for the fourth phase of the Royal Collections Museum project. The work, which involves finishing and installations, is located on Bailén street and was tendered by National Heritage.
The museum, set to house more than 155,000 works from the royal collection and positioned between the Royal Palace and La Almudena, is slated to open on June 28. It marks the culmination of a state project that has unfolded over 25 years. The 40,000-square-meter building was designed for this project by architects Mansilla and Tuñón, who have earned ten architecture awards to date.
The legal timeline traces back to September 16, 2019, when the Municipal Economic Administrative Court of Madrid ruled that Dragados, part of the ACS group led by Florentino Pérez, owed 365,804 euros in tax for ICIO. The company appealed, and Madrid’s 2nd Administrative Court overturned that municipal decision on April 19, 2022, finding it unlawful.
The TSJM ultimately determined that no license was required since the contested works were promoted by and belonged to National Heritage and were declared to be in the public interest. Following the ruling, the City Council of Madrid appealed to the Council of State, which challenged the case, but no justification has since been provided.
In its appeal, the Council argued that the legal framework requires a license or a substitution procedure before the case begins, except in cases of unmet exceptions as defined by the City Council. It also asserted that obtaining a license is essential, regardless of later exemption from paying the tax.
General interest
Madrid City Council contends that the works did not fall under the general licensing rule, as they did not affect more than one municipality. The council notes that major public infrastructure projects typically involve regional impact, whereas these finishing works and installations were confined to the municipal term and directly tied to the Madrid City Council and a specific building.
According to this view, some finishing works and installations of the Museum building could not be classified as supra-municipal projects that influence spatial planning, at most. The council compares this with other major works such as the renovation of Mahón airport or Prat de Llobregat airport, which were treated differently.
The TSJM’s decision dismisses the grounds of appeal that argued large museum construction should be treated as a public-interest activity. It recalls that the project was authorized by a Council of Ministers resolution dated June 17, 2005, which declared exceptional public interest. The court also notes that, as with the Museo Nacional reform, it has repeatedly characterized major works with state jurisdiction as not left to municipal will because of their societal significance. A similar precedent is the Del Prado and the Los Jerónimos Church Convent cases.
License
The Madrid Supreme Court also recalls that this procedure did not involve a formal license request to the City Council. Instead, the project was referred by the competent ministry for relevant reasons, with a view to determining whether to report the activity as eligible within one month. The court explains that this means there is no requirement to submit approved technical drawings to the municipal administration by an architect who documents all project details.
In light of the circumstances and the project’s extreme complexity, the court considers it sufficient that the submitted plan clearly shows the essential features of the work and demonstrates whether the approach is viable. The City Council will use its declaratory power to confirm compliance or identify inconsistencies with the project’s approach. This decision aligns with the requirement for proper oversight of such high-profile works.
— Attribution: Tribunal Supremo de Justicia de Madrid (TSJM) and related administrative courts, as reported in the ruling concerning Dragados and the ICIO tax case against the Madrid City Council.