Development of the DGT criteria on the calculation of the tax base in mortgage loan amendments

The Directorate General of Taxes (the "DGT"), in response to a binding consultation (V2305-21), develops the criteria of the DGT on the calculation of the tax base for AJD in amendments of mortgage loans.

The starting point is a factual situation of a company that entered into a deed of constitution of first and second rank real estate mortgages in order to secure a documented loan and where the lender is not a credit institution. When the time comes, the parties intend to amend the mortgages by executing a public deed for the sole purpose of extending the term (the "modifying novation"). What would be the tax base for AJD for executing the contract to extend the term of the mortgage loan?

Although the DGT begins with an exhaustive analysis of the possible subjection of the transaction to Transfer Tax or VAT, as well as the taxable person in the amendments of a mortgage loan, it is necessary to highlight, in this case, the issues relating to the determination of the tax base for AJD. The modifying novation would be subject to the variable quota of the AJD modality, notarial documents, as long as the following requirements are met (established in article 31.2 of the TRLITPAJD ("Texto Refundido de la Ley del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados")):

• it is the first copy of a public deed;
• having as its object a valuable thing or quantity;
• contain an act registrable in the Land Registry; and
• not be subject to Inheritance and Gift Tax (the "ISD" ("Impuesto sobre Sucesiones y Donaciones")) or to the concepts included in the modalities of onerous patrimonial transfers and corporate transactions.

After verifying that it is a first copy of a public deed, that it is registrable in the Land Registry and that it is not subject to ISD or to the aforementioned concepts, the DGT analyses whether or not this modifying novation has valuable content.

In this sense, the DGT reminds us that, although the mortgage security is not modified as in this case, if the modifying novation is quantifiable, it has a valuable content and, consequently, it will be subject to the ITPAJD modality, notarial documents, in accordance with articles 28 and 31.2 of the TRLITPAJD. In this sense, the Supreme Court in numerous rulings has already recognised that "the tax base of the modifying novation of the loan secured by mortgage subject to and not exempt from the modality of documented legal acts, notarial documents, of the ITPAJD will be determined by "the economic content of the valuable financial clauses that delimit the economic capacity susceptible to taxation.

On the other hand, and given the nature of the lender, the modifying novation does not fall within the exemption set out in Law 2/1981, of 25 March 1981, regulating the mortgage market, as the lender is not one of the financial institutions listed in article 2 of the aforementioned Law (i.e. it is not a bank, savings bank, CECA, credit cooperative nor financial credit institution).

The DGT thus clarifies, and this is what is relevant in the reply under comment, that the tax base in the modifying novation would not be made up of the mortgage liability attributable to the total pending payment, but only by the added interest and the additional costs involved in the extension of the term itself. All of this, of course, without prejudice to the verification that may be carried out by the competent tax office based on the documentation that was presented.

In our opinion, the above-mentioned answer represents an important step in the determination of the tax base of the AJD in the amendment of mortgage loans which, following the path initiated by the Supreme Court, abandons the thesis of identifying the tax base with the mortgage liability attributable to the total outstanding at the time of the amendment and must specify the amount that increases the mortgage by virtue of the clauses that are amended.