The Supreme Court, by Order of January 14, 2026 (ATS 329/2026), has admitted the appeal filed by the Community of Madrid regarding the application of the reduced 4% tax rate in the Property Transfer Tax (ITP) for the acquisition of a primary residence by large families.
The central issue is whether this tax benefit can be applied when, at the time the tax accrues, the taxpayer has not yet been formally recognized as a large family because their third child was conceived but not yet born. The Supreme Court finds objective grounds for appeal both due to the existence of contradictory judicial criteria among different courts and the lack of jurisprudence on how tax regulations should be reconciled with the legal fiction of the unborn child (nasciturus) established in the Civil Code.
This order admitting the case arises from proceedings related to the Property Transfer Tax and Stamp Duty (ITP-AJD), specifically regarding onerous property transfers.
On June 24, 2020, two spouses under a separation of property regime acquired a home for €545,000, each acquiring 50%. Both self-assessed the tax applying the standard rate of 6%, paying €16,350 each. Subsequently, Ms. Asunción requested a refund of overpaid taxes, arguing that the reduced rate of 4% should have been applied, as she was pregnant with her third child at the time of the deed. The child was born later, meeting the requirements of Article 30 of the Civil Code.
The Directorate General of Taxes of the Community of Madrid denied the refund because, at the time of accrual, the taxpayer was not a member of a large family. The Madrid Regional Economic-Administrative Court (TEAR), in its ruling of March 17, 2023, upheld the claim based on Article 29 of the Civil Code: given that the third child had already been conceived and was subsequently born alive, the child should be considered born for the purposes of the tax benefit. The Community of Madrid appealed to the High Court of Justice of Madrid (TSJ), which dismissed the appeal in its judgment of March 14, 2025, with the same reasoning: the tax benefit applies to the entire family, and no distinction can be made between what economically benefits the parents and what benefits the unborn child. The Community of Madrid filed this appeal against that judgment.
The question that the Supreme Court must resolve is: whether a tax benefit intended for large families (in this case, the reduced rate of 4% on the transfer of the primary residence) is applicable when, at the time of accrual, the taxpayer is not yet a member of a large family because the third child has been conceived but not yet born.
Position of the Community of Madrid (appellant)
The regional government argues that, according to Law 40/2003 on the Protection of Large Families, large family status requires the presence of three children at the time the tax accrues, and that this status is certified by the corresponding official document, the application for which is only effective from the date of submission (Article 7.1 of the Law on Large Families). Furthermore, it considers that extending the benefit to the unborn child constitutes an analogous application of a tax benefit, expressly prohibited by Article 14 of the General Tax Law. In its opinion, Article 29 of the Civil Code protects the rights of the conceived child (such as inheritances or donations), but in the Property Transfer Tax (ITP), the taxpayers are the buyers, not the unborn child, and therefore there is no right of the unborn child that needs to be protected.
Position of the taxpayer (appellant) and the lower courts.
The taxpayer and the courts that ruled in her favor argue that Article 29 of the Civil Code (which mandates that the unborn child be considered born for all purposes that are favorable to it) allows for the provisional recognition of the tax benefit, which will be consolidated when the child is born alive. The High Court of Justice of Madrid adds that Article 39 of the Constitution obliges public authorities to protect the family, which requires interpreting the regulations teleologically, opting for the interpretation that offers the most effective protection for large families.
The Supreme Court has found objective grounds for cassation for two reasons. First, different courts are resolving identical situations in a contradictory manner: the High Court of Justice of Madrid and several Regional Economic-Administrative Courts recognize the benefit based on Article 29 of the Civil Code, while the High Court of Justice of Galicia denies it, considering that extending it to the unborn child constitutes a prohibited analogy. Secondly, there is still no Supreme Court jurisprudence on the interaction between the accrual tax rules and the legal fiction of the unborn child under the Civil Code.
The Supreme Court's ruling could have broader implications than the Property Transfer Tax itself. The same arguments could be applied to other taxes, such as the large family deduction in Personal Income Tax or equivalent regional deductions. Furthermore, it will establish a precedent on whether the prohibition against analogy in matters of tax benefits (Article 14 of the General Tax Law) acts as an absolute limit against the constitutional protection of the family, a question that has thus far remained unresolved.