The AJD tax on mortgages, how is it now?
On October 16, 2018, the Supreme Court issued a ruling providing that the person who must pay the Tax on Documented Legal Acts, in the form of notarial documents, was the lender. This represented a change in the interpretation that had been maintained until then and, as a consequence, the banks would have to pay said tax.
The Second Section of the Contentious-Administrative Chamber of the Supreme Court ruled in the same sense in rulings of October 22 and 23. Such rulings caused a situation of uncertainty that led to a reduction in the number of mortgages taken out.
Subsequently, on November 5, the Plenary Session of the Contentious-Administrative Chamber of the Supreme Court met and a day later agreed to once again place the obligation to pay the tax on the person requesting the loan.
All these events and changes in criteria have caused legal uncertainty that affects the entire mortgage and real estate market in general. This has motivated the Government to make a modification to the Consolidated Text of the Law on the Tax on Property Transfers and Documented Legal Acts.
Thus, on November 9, Royal Decree-Law 17/2018 was published in the BOE, which modifies article 29 of the Consolidated Text of the Law on the Tax on Property Transfers and Documented Legal Acts. After this modification, it is established that the taxpayer of the Documented Legal Acts tax, in the case of deeds of loan constitution with mortgage guarantee, will be the lender.
On the other hand, article 45.I.B) is modified to declare loan deeds with mortgage guarantee in which the borrower is one of the following persons or entities exempt from the AJD tax: the State and territorial public administrations and institutional and their charitable, cultural, Social Security, educational or scientific establishments; The Spanish Red Cross and ONCE; political parties with parliamentary representation; savings banks and banking foundations, for acquisitions directly destined for their social work; the Catholic Church and the churches, confessions and religious communities that have signed cooperation agreements with the Spanish State; the non-profit entities referred to in article 2 of the Law on the tax regime of non-profit entities and tax incentives for patronage.
In addition, it is established that for the years beginning on November 10, 2018, the tax debt from the payment of the AJD tax will be considered a fiscally non-deductible expense in the lender’s Corporate Tax.< /p>
In this way, as of November 9, banks must pay the AJD tax for mortgage deeds. Now it remains to be seen whether these will pass the tax on to clients, increasing the costs of such mortgages.