Find out the latest news about the municipal capital gain (Plusvalía Municipal) tax in cases where it’s greater than the profit obtained when selling the property.
The ruling of the Constitutional Court (TC) has declared article 107.4 of the consolidated text of the Local Property Regulatory Law unconstitutional. This article pertains to the Tax on the Increase of the Value of Urban Nature Lands (known as “municipal capital gain”). You can read the full sentence in Spanish here.
With this sentence you might not have to pay if the profit obtained from the sale of your property is lower than the fee to be paid.
According to the Constitutional Court this tax is considered confiscatory when its amount is greater than the capital increase, calculated not only on the sale price, but including all the expenses incurred to carry out said sale (notary, registration, etc.).
The judicial body emphasises that in the case that arises in this matter of unconstitutionality a net difference between the acquisition price and the transfer price of 3,473.90 euros is manifested and, nevertheless, an increase in value is attributed derived from the application of tax regulations of 17,800.12 euros, with a fee to be paid of 3,560.02 euros – higher than the actual increase obtained.
The judicial body considers that if there’s an increase in real value for the transfer of land and the fee to be paid is greater than said increase, there would have been a “de facto expropriation”, which could be confiscatory.
With this ruling, the Constitutional Court makes it very clear, once again, that the formula for calculating this tax is not adequate and it has become a grievance for many taxpayers.
After this ruling will the surplus value stop being paid?
No, only in certain cases. In addition, not paying the tax could lead to a dangerous situation that would enable the corresponding City Council “to seize the taxpayer’s assets” which could typically lead to the seizure of your payroll or bank accounts.
Are there any deadlines to claim this capital gain tax?
- If you have paid the tax voluntarily (self-assessment), you have a 4 years.
- If the payment was made at the request of the city council (liquidation), you have 1 month.
What should you do if you are one of the affected?
- If you have already paid the capital gain tax:
We’ll be pleased to study your case and if appropriate, file the municipal capital gain claim against the relevant city council.
To be able to start the process we will need a series of documents including:
– liquidation or self-assessment of surplus value,
-the acquisition deed,
-the deed of transmission of the property.
- If you haven’t paid the surplus value yet:
We’ll study the best possible option to help you file your tax. This is what we’ll need:
-the acquisition deed,
-the deed of transmission of the property.
As our litigation expert José Ignacio Sánchez explains “our goal is for you to recover your money either by administrative or judicial means. If you have sold, inherited or donated a home in the last four years, with minimal losses or gains, we’ll demand a 100% refund of the amount paid”.
Are you currently facing this problem?
Get in touch with Fuster & Associates and we’ll find the best possible avenue to help you claim the money you’ve paid in excess in capital gains tax.
We want to help you navigate all the legal complexities that come with your home buying in Spain, but this article is legal information and should not be seen as legal advice.
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