Background
On 10 October 2018, the Spanish Supreme Court issued a ruling changing its traditional criterion and establishing that the lenders (and not the borrowers) would be liable for the payment of the stamp duty triggered by the creation of the mortgages securing financings. The Supreme Court also declared article 68.2 of the Stamp Duty Regulation (passed by Royal Decree 828/1995, of 25 May), which expressly established that the borrower is liable for the stamp duty, null and void as contrary to that new interpretation.
However, the President of the corresponding Section of the Supreme Court called all its members for a meeting to review this new criterion and to consider its ratification. The radical change in respect of the previous Supreme Court’s case law and the enormous economic and social impact of the application of the new interpretation were the main reasons argued to justify such an extraordinary revision process.
Where are we now? The Spanish Supreme Court’s final decision
Last Tuesday 9 November, after two days of long and intense deliberation, with a 15-to-13 vote and in the midst of a great division, the Supreme Court decided to maintain its historical case law and keep its interpretation of the law that considers the borrowers liable for the payment of the stamp duty triggered by the creation of mortgages securing financing.
The ruling containing the reasoning of this final decision in which the Supreme Court has returned to its traditional position, has not been published yet.
Governmental reaction
As a response to the Supreme Court’s decision, last Friday, the Spanish Council of Ministers approved the Royal Decree-law 17/2018 to modify the Stamp Duty Law (passed by Royal Decree-law 1/1993, of 24 September). This new Royal Decree-law 17/2018, which came into force last 10 November 2018, sets out that, for all mortgages created (as taxable event) once the Royal Decree-law has entered into force, the lender will be liable for the stamp duty.
The Royal Decree-law 17/2018 also includes a new section in the Corporate Income Tax Law (Law 27/2014, of 27 November) to prevent lenders from considering the stamp duty as tax-deductible expense in those cases where they have been liable for its payment. This change will be applicable to tax periods starting from the date of the entry into force of the Royal Decree-law 17/2018.
Finally, the Royal Decree-Law 17/2018 clarifies that some cases where the borrower has been benefiting from a subjective exemption will still be exempt from taxation and will not be affected by the amendment. For example, mortgage loan deeds in which the borrower is the State and Public Administrations, the Social Security Administration or certain foundations will remain exempt from the stamp duty.
This new regulation is in force and binding. Although it will go through a formal recognition process in the Congress. The Supreme Court must apply these legislative changes and must rule, from now on, accordingly.
