Doctrine of taxable events and tax benefits of the Stamp Duty (AJD (Actos Jurídicos Documentados)) in deeds of amendment of loans and credits secured by means of mortgage.

Written on 22 Apr 2020

The Supreme Court resolves in its Judgment of 26 February 2020 (STS 663/2020) on the submission to the AJD of deeds modifying mortgage loans or credits not covered by the exceptions set out in Article 9 of Law 2/1994 of 30 March on subrogation and modification of mortgage loans.

The subjection of the first copies of deeds or notarial acts, as well as their amendments, to the AJD requires that they have as their object a quantity or a valuable item, contain acts or contracts that can be registered before a public registry and are not subject to inheritance and gift tax, requirements without which the estimate of the taxable event of the tax is not given and, consequently, there is no subjection. Furthermore, in accordance with Article 9 of Law 2/1994 of 30 March 1994 ("Law 2/1994"), amendments of mortgage loans or credits, agreed by common agreement, referring to the interest rate and/or the alteration of the term and/or a combination of both, are exempt from taxation by AJD.

In its judgment of 26 February 2020, the Supreme Court resolved a question concerning the application of the exemptions provided for in Law 2/1994 and on the liability (or non-liability) to the AJD tax of those other amendments excluded from the exemptions provided for in Law 2/1994. The judgment puts an end to the discussion about a case in which the Tax Administration claimed the liquidation of the AJD for the amendment of a credit (not a loan) in which both the interest rate clause and the repayment schedule were modified, as well as other clauses, among others, of definitions, corporate structure of the borrower and of "covenants" or ratios of the contract. The tax authorities' argument for requiring the settlement of the amendment to the mortgage loan clauses is that these other amendments are not included in the (restrictive) list of exemptions provided for in Law 2/1994, and that the tax authorities are focusing on the exclusive application of the tax benefit to mortgage loans (and not to credits, as was the case).

In this judgment, the Supreme Court points out that (i) on the one hand, the exemption from the application of the AJD, by virtue of the case law (jurisprudencia) of this court, also extends to mortgage credits; and (ii) on the other hand, it establishes that the modifications by virtue of deeds of novation of mortgage loans/credits will be subject to the AJD, outside the cases exempted by Law 2/1994, only when all the conditions required by the taxable event of the AJD are met (in the case in question, the modifications lacked an evaluable amount). In other words, in order for modifications to mortgage loans or credits, documented in a public deed, to be subject to the AJD tax (even when such modifications are established in a deed where, in addition, there are modifications covered by the exemption of Law 2/1994), it must be verified that, for each of these modifications, the criteria for subjecting the taxable event of the AJD are met, that is: (i) first copies of deeds or notarial acts; (ii) which have as their object a quantity or valuable item; (iii) registrable in the Commercial, Property, Intellectual Property or Movable Goods Registry; and (iv) not subject to Inheritance and Gift Tax.