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This overview refers to a resolution given by the General Directorate of Registries and Notaries (Dirección General de Registros y Notariado – “DGRN”) dated 1st April 2019.
The facts of the case are as follows: an application for the registration of the award of an estate was filed at the Land Registry of Madrid, to which an application for exemption from the payment of local tax on the increase in value of real estate was attached.
The Land Registrar stopped the registration, arguing that said tax had not been paid.
The interested party lodged an appeal against said resolution with the General Directorate of Registries and Notaries.
The object of dispute was whether or not to proceed with the registration of the public deed of award of a property if the local tax on the increase in value of real estate has not been settled, but instead a copy of the letter addressed to the Administration requesting exemption from payment has been presented.
The General Directorate of Registries and Notaries starts by admitting that in accordance with article 254 of the Mortgage Act, the registration of a document shall not be allowed unless the prior payment of the taxes established for the operation in question has been demonstrated.
Notwithstanding the above, the principle does not have an invariable application, but finds the exception in article 110.6 b) of the Law regulating Local Tax Authorities. This section allows the furnishing, together with the document intended for registration, of a document which has been provided for in the regulations, and which replaces the document demonstrating the payment of the local tax on the increase in value of real estate. This section leaves it to the discretion of the municipalities to issue regulations that legally foresee the filing of certain documents, substituting those that accredit said payment. In fact, the General Directorate of Registries and Notaries has already issued a favourable statement regarding the registration of documents which contain acts or contracts which determine tax obligations subject to local tax on the increase in value of real estate (resolution dated 27th November 2017, among others) in cases similar to that described above, provided that they fulfil the requirements set forth in the municipal regulations.
In this case in particular, the Tax Regulation of the Madrid City Hall, regulator of the local tax on the increase in value of real estate, allows the filing of a statement before the Tax Authorities of the City Hall when the interested party considers that the transmission of the property should be deemed exempt, expired or not subject to the tax, the claim is well founded and the document contains the entry stamp of the City Hall or other relevant organism. The same Ordinance provides that the Registry must keep a copy of said communication, and understands that the registration shall take place without prejudice to the decision taken by the Tax Authorities regarding the application: likewise, it must be understood that should the application be dismissed, the interested party must proceed with the payment of the local tax on the increase in value of real estate, within the deadline of one month as from the notification of said resolution.
Given that the interested party fulfilled the requirements of the municipal Ordinance, the General Directorate of Registries and Notaries accepted the appeal filed and ordered the lifting of the closing of the registry and the allowance of the registration of the inheritance award document.
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Barcelona, 26th April 2019