B Law & Tax
25 August 2023

Tax Advisor: The Supreme Court rules that municipalities cannot differentiate fees according to census registration

In its most recent ruling, Supreme Court Ruling No. 1064/2023 issued on July 20, 2023, it is established that a municipality cannot apply differences in a fee for the use of municipal sports facilities such as frontons and swimming pools, based on whether or not the users are registered in the municipality. Registration is not considered a reasonable and objective criterion in this case to justify such differences. The central question was whether the regulation that provides a tax benefit linked to census registration complies with the principle of legal reserve.

In this regard, Article 8 of Law 58/2003, General Tax Law (LGT), establishes that aspects such as the establishment, modification, elimination and extension of exemptions, reductions, rebates, deductions and other tax incentives must be regulated by law.

Article 9 of Royal Legislative Decree 2/2004, of March 5, which approves the revised text of the Law Regulating Local Treasuries (TRLRHL), establishes that no tax benefits may be granted in local taxes that are not clearly provided for in higher-ranking laws or derived from international treaties. However, local entities have the possibility of granting tax benefits in their tax ordinances only in situations expressly authorized by law.

The SC concludes that tax ordinances cannot establish tax benefits without support in higher-ranking laws. It also analyzes how these allowances affect the principle of equality, which requires equal treatment of comparable situations, prohibiting unjustified discrimination. To avoid discrimination, an objective and reasonable justification based on widely accepted criteria is required.

In the area of fees, governed by the principle of equivalence, Article 24.4 of the TRLRHL only allows adjustments based on the economic capacity of the obligors. However, the Supreme Court argues that in this case there is no valid economic justification since census registration cannot support differences in rates. The census registration is not a reasonable basis to justify different rates in municipal sports facilities, such as swimming pools and frontons, according to the ruling. The Court also differentiates this situation from public or private prices and emphasizes that in this case the ordinance establishes a fee.

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