The executive has approved Royal Decree-Law 17/2018, of 8 November, by virtue of which banks granting mortgage loans shall be liable for stamp duty without the possibility of claiming relief in their corporate income tax return. 

1. Analysis of the content of the Royal Decree-Law 

The executive has approved Royal Decree-Law 17/2018, of 8 November, amending the Stamp Duty (Recast) Act. The main objective of this piece of legislation has been to put an end to the uncertainty generated by the changes in opinion recently shown by the Supreme Court when trying to identify the taxpayer of the stamp duty when mortgage-backed loan transactions are formalised.

This Decree-Law provides for, in the first place, the amendment of Article 29 of the aforementioned recast version, adding a paragraph in which it is expressly stated that “in the case of mortgagebacked loan deeds, the lender shall be deemed the taxpayer”. 

Secondly, changes are also made to Article 45(I)(B) of the recast version, adding a new subarticle - number 25 – that excludes “mortgage-backed loan deeds where the borrower is one of the persons or entities included in letter (A) above”, which mentions, among others, the State, the Catholic Church, political parties, the Red Cross and savings banks and bank foundations, in acquisitions directly intended for social work.

Lastly, the Decree-Law amends the Corporate Income Tax Act 27/2014 of 27 November by adding a new point (m) to Article 15 thereof. As a consequence of this, lending institutions will not be allowed to claim relief in their corporate income tax return for stamp duty expenses derived from the formalisation of mortgage-backed loans.

Taking into account both the constitutional requirements for a government’s use of the legislative device of the decree-law, and the controversy created in many cases by such use in tax matters, the executive has devoted much of the explanatory notes to Royal Decree-Law 17/2018 to justify the same. 

Said notes refer to a situation of extraordinary and urgent need, arising in this case from the legal uncertainty caused by the latest pronouncements of the court of last resort. Among other outcomes, it is claimed that said uncertainty has paralysed the mortgage market, rendering immediate legislative action necessary to put an end to a situation of exceptionality, seriousness, relevance and unpredictability.

In addition, aware of the problems surrounding the device of the Decree-Law in tax matters, the legal doctrine of the Constitutional Court is recalled, according to which, the aforementioned extraordinary and urgent need present, the Decree-Law may be used to regulate tax aspects, provided that the regulatory changes introduced do not alter taxpayers’ duty to pay as a whole. The executive believes that in this case there is no such alteration, understanding that the legislative amendments made by the Decree-Law alter a partial aspect of a specific tax and, within it, only in one of its categories. 

2. Controversial aspects of the new regulation. 

Though sharing the view that a legislative amendment was warranted to bring legal certainty to the issue at hand, it is our opinion that Royal Decree-Law 17/2018, perhaps because of the haste with which it was adopted, has opened the door to new controversial issues.

Firstly, the Royal Decree-Law has avoided any reference to the situation in which those credit cooperatives that, like rural savings banks, enjoy the tax benefits conferred by Article 33 of the Cooperatives (Tax Scheme) Act 20/1990 of 19 December, are now. According to the aforementioned article, protected cooperatives are exempted, “from any of the events that may apply” for stamp duty purposes, a situation that, in principle, and taking into account the wording, would place them outside the obligation to pay stamp duty when granting mortgagebacked loans. What seems like forgetfulness on the part of the executive could be corrected during the subsequent parliamentary passage to put an end to the provisional nature that characterises Decree-Laws.

Further complications may derive from another of the aspects regulated by the piece of legislation under review. We are referring to the fact that lenders cannot claim relief for stamp duty expenses in their corporate income tax return. 

Moreover, one cannot ignore the reproof that a measure such as this, regardless of the type of legislation through which it ends up being incorporated into our legal system, may merit in view of the most elementary principles of tax justice, such as equality or ability to pay. One must think of the difficult justification in this case for prohibiting recovery of a tax borne and accounted for as an expense related to the business activity of lenders, when it is permitted in similar cases, as is the case of the property tax, the business activity tax and, even, the rest of stamp duty categories.

Among the reasons that may have led to the rejection of such tax relief we may encounter essential revenue ones, but also, given the possibility that financial institutions may end up passing on this tax to their clients through terms stipulated in mortgage loan agreements, the executive could have tried with this measure to avoid the unjust enrichment of lenders. 

The foregoing considerations allow us to venture the opinion that we have not seen the last of the problems arising from stamp duty liability when a mortgage loan is formalised