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On February 25, 2021, the Supreme Court delivered a judgment holding that the cost/benefit multiplier (generally 1.4) does not have to be applied to the cadastral values of properties with certain characteristics, including where there are restrictions on their sale. We first reported on this in our Tax Newsletter in March.

Not applying the cost/benefit multiplier may lower the cadastral value of the property by percentages in the region of 28%/ 29%, with the resulting real estate tax saving.

Properties under an administrative concession have restrictions placed on their transfer. For that reason, this decision by the Supreme Court could affect yacht and sailing clubs, leisure harbors and marinas, for which after analyzing the cadastral values of the properties they contain, implementing this case law could bring significant savings in terms of the real estate tax on them.

The Supreme Court ruled to the effect that the purpose of the cost/benefit multiplier is to include in the cadastral value the “production costs and income of the business activity of developing” the property and, specifically, “this multiplier is not applicable in a case like the one examined in this proceeding, in which the property whose cadastral value is at issue, was not built to be sold on the real estate market –and, therefore, as part of a property development business activity- but instead for the operation of a hospital and a home for the elderly, subject to a prohibition on its transfer for a 10-year period under a condition imposed in the municipal concession”.

Although this judgment could in principle be taken to apply only to administrative concessions (like the hospital that was the subject matter of the proceeding) in which there is an express prohibition on selling the property, there is a chance that it could ultimately be held that the multiplier, or at least, the 1.4 multiplier usually applied, is not applicable in cases where no “property development” business activity exists in the strict sense.

As a result, the cadastral values of yacht and sailing clubs, leisure harbors and marinas should be reviewed and a procedure initiated with the Cadaster to apply for the cost/benefit multiplier not to be applicable for properties under administrative concessions, while waiting to see whether or not the Supreme Court clarifies the judgment mentioned above.