Concordance between civil-law and tax-law criteria addressing legal operations is desirable. Such coincidence does not exist in the case of transmissions where the buyer is undetermined. The most common example is the buying and selling of properties in a private document, in which the buyer reserves to himself, by means of a specific clause, the right either to complete the operation or to point a third party to do so in its own name and right.

The civil-law standard on the operation is clear, and laid out in the RDGRN of 11 June 2015 (BOE 178 of July 27). The Directorate decides on the negative qualification note issued by Property Register No. 4 in Ibiza (Balearic Islands), for which is denied the access to the registration of a deed in which the buyer appearing in the private deed appointed a third party which finally acquired the property. The Registrar of Property refused registration because – as explained in his note – in the absence of title and traditio, essential in Spanish law for the transfer of real elements. That is, the Registrar believes that the purchase contract is completed by private writing, which is fixed the subjective element of the contract (the identity of the parties), the objective element (thing and price) and as well as traditio which would have made “brevi manu” or only symbolically.

Such an interpretation is corrected by the Directorate, which accepting the appellant’s arguments notary, reverses the Registrar decision and on the basis that: (i) the principle of contract autonomy (1,255 CC) allows to parties contracting aside from preset models and configuring synallagmatic relationship according to their best common interests; (ii) that the contracts of the kind “designation of a third party” are accepted expressly by analogue legal systems (Italian and Portuguese civil codes) and the Provincial Compilation of Navarra (Act 514) apart from being implicit in our procedural law, which admits, in the enforcement step the transfer of rigths to a third party; and according these, the indeterminacy of a possible beneficiary does not prejudice the completion of the sale contract of , indeterminacy ending with the designation of the beneficiary, with effect “ex tunc” from the moment of completion of the contract, such so that one should consider that the beneficiary has been the contract holder since the beginning; and (iii) it is wrong to consider that there has been no title either way, since the title is the deed of sale, which designates the third beneficiary as a buyer including instrumental traditio, as contemplated by Article 1462 of the Civil Code.

In other words, we are not facing two consecutive transmissions, the first from seller to buyer, the second from the buyer to the final beneficiary; but developed through a single legal business and one transmission,registrable in the Land Registry. However being provided this solution by the civil law and its interpretation, which is also the one that best fits the rules of logic, the tax system provides an opposite solution and entails adverse economic consequences of great relevant.

It is consistent interpretation of the Tribunal Económico Administrativo Central (Resolution dated July 20, 1988), that in the development of contracts purchase for a person to designate occur -the least – two legal business: the first transmission from seller to buyer, and the second from buyer to the designated beneficiary. These transmissions are subject to corresponding transfer Tax (ITP). And we say” the least”, because the transfer of the contractual ownership is subject either to ITP, if the transferor has received consideration or to Gift Tax (ISD), if the transferor’s acted gratuitously, usually the norm in this kind of contract. Accordingly, the transaction would be subject to triple taxation, rather than the single taxation of real estate transfers.

In other words, the interpretation of civil law by the Supreme Court, which serves the ultimate purpose of the contract, where the parties involved do not act under a plurality of contracts, but want a single transmission and a single acquirer, leaving this undetermined until the granting of the public deed, is challenged by the interpretation of tax law by the Tribunal Económico Administrativo Central (TEAC) which disregards the supremacy of the legal interpretation by the Supreme Court, in accordance with Article 1.6 of the Civil Code. There is only one transmission. Therefore taxation must be rather one, and not triple. It is true that under the resolution of the TEAC lives a principle of caution and distrust of the taxpayer, represented by the legitimate suspicion that behind a purchase with “beneficiary designation” may reside actually two successive purchases and therefore animus fraudandi. However, this stance is excessive, since the decision should be taken on a casuistic basis. Otherwise this would prove excessively onerous and hindering of legal traffic.

Leave a Reply