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Once the relevant procedures have been carried out and a change of use license has been obtained from the relevant Town Hall, this matter must be formalized in a public Deed for its subsequent registration in the Property Registry, and where applicable, in the Cadastre.
Articles 30 and 31 of Royal Legislative Decree 1/1993, of September 24, which approves the Consolidated Text of the Law on Property Transfer Tax and Documented Legal Acts, determine the taxable base and the tax rate (hereinafter, LITP-AJD).
The question to be resolved is to determine, with respect to the variable portion of the tax, whether the Deed of change of use has as its object a quantity or valuable thing as defined by article 30 LITP-AJD in order to determine the taxable base of the AJD tax in notarial instruments, this idea about the economic content is reiterated in point 2 of article 31 LITP-AJD, when determining the tax quota it refers to the first copies of Deeds and notarial acts provided that they have as their object a quantity or valuable thing.
Requirements for taxation by AJD (according to article 31.2 LITP-AJD):
- That is the first copy of a Deed or Notarial Act.
- That has as its object a quantity or valuable thing.
- That contain acts or contracts that can be registered in the Property Registry, the Commercial Registry, the Industrial Property Registry or the Registry of Movable Property, not subject to the Inheritance and Gift Tax or to the modalities of Onerous Property Transfers and Corporate Operations of the ITP-AJD.
Points 1) and 3) are met. The problem lies in determining whether or not the public Deed requires the existence of a sum of money or valuable item.
In its binding ruling V1948-14, the Directorate General of Taxes (hereinafter, DGT) is clear on this point, considering that a change of use has a significant value because it implies a change in the cadastral value of the property, which therefore influences its real value. The taxable base in this case would be the value of the property that changes from office to residential.
However, according to binding ruling V0075-17, if the property is already registered in the Land Registry as a dwelling and this does not entail a change in value, the Directorate General of Taxes (DGT) considers that there is no transfer of value and, therefore, the transaction would not be subject to Stamp Duty. The DGT expresses the same opinion in binding ruling V1033-21.
If the change is considered valuable because the property is registered in the Land Registry with a different use than the one being changed, the taxable base should be the increase in value corresponding to the new use of the property or its execution cost (cost of the renovation, if applicable). However, the issue remains unclear because, according to some Courts, changes of use do not have a valuable component and, therefore, are not subject to Stamp Duty. If the Land Registry already lists the property as a dwelling, this would not imply any modification of the cadastral value.
In conclusion, we can state that the granting of a public Deed to register the change of use of a property in the Property Registry is not an operation that we consider to have a valuable content, especially for the purposes of the taxable event that triggers the application of the variable fee for notarial documents in the Documented Legal Acts modality of the ITP-AJD.
