The sale of a pharmacy is subject to Stamp Duty (AJD)

In two recent judgments of November 26 (appeal no. 3873/2019 and appeal no. 3631/2019), the Supreme Court ruled on whether the first copies of public deeds documenting the sale of a pharmacy (oficina de farmacia) are subject to Transfer Tax and Stamp Duty (ITP-AJD), under its Stamp Duty (AJD) component. The second judgment essentially reproduces the first, so we will refer to the first.

In the case at hand, the Directorate General for Taxation of the Community of Madrid takes the view that, where a pharmacy is transferred and the transfer is documented in a public deed, the requirements of Article 31.2 of the Consolidated Text of the Transfer Tax and Stamp Duty Law (TRLITPAJD) for the transaction to be subject to AJD are met. That is, the document is a first copy of a public deed, it relates to an amount or item capable of valuation, it contains an act or contract that can be registered in the Movable Property Registry (Registro de Bienes Muebles), and the act is not subject to Inheritance and Gift Tax (ISD) or to the Transfer Tax (TPO) or Corporate Transactions (operaciones societarias, OS) components of ITP-AJD.

By contrast, the High Court of Justice (TSJ) of Madrid held that the transfer of the pharmacy is not subject to AJD. In its view, although the deed relates to an item capable of economic valuation, the transaction cannot be registered in the Movable Property Registry, at least not on a mandatory or constitutive basis or with effects vis-à-vis third parties, so the requirement laid down in Article 31.2 of the TRLITPAJD is not met.

The Supreme Court upholds the cassation appeal (recurso de casación) filed by the Community of Madrid and holds that the transaction is subject to the AJD component of the tax because it can be registered in the Movable Property Registry. Accordingly, it establishes the following interpretation of Article 31.2 of the TRLITPAJD:

“The first copy of a notarial deed documenting the assignment or transfer of a pharmacy is an act subject, under Article 31.2 TRLITPAJD, to Stamp Duty, since such title may be registered in the Movable Property Registry created by the sole additional provision of Royal Decree 1828/1999, of December 3, approving the Regulations of the Registry of General Contracting Terms. In particular, the assignment or transfer of a pharmacy may fall within the sole additional provision of Royal Decree 1828/1999, specifically paragraph 1, Section 5 (‘Section for other registrable movable property’); and there is no other rule that prevents the registration of such a transaction in the Movable Property Registry, regardless of the effectiveness or effects attributed to that registration.”

The Supreme Court reaches this conclusion on the basis of the case law previously established in its judgments of April 25, 2013 (appeal no. 5699/2010) and September 13, 2013 (appeal no. 4600/2012), which may be summarized as follows:

• For the purposes of the taxable event of AJD (variable charge, notarial documents), the act or transaction does not need to be registered; it is sufficient that it be registrable.
• Registrability must be interpreted as access to the Registries. It is sufficient that the document be capable of registration, regardless of whether registration actually takes place and of whether it is mandatory or voluntary.