The City of Madrid will continue to apply the municipal capital surtax, known as “plusvalía tax” on those real estate transfers which have been sold at losses.

This is because the Constitutional Court (Tribunal Constitucional) has not yet made the changes to the law affecting this (Ley Reguladora de las Haciendas Locales).

Should I still pay the plusvalía tax and can I reclaim?

The option that remains for the affected is to submit your appeals as soon as possible to the Madrid Tax Agency and the Municipal Economic Administrative Court.

It is estimated that, at the national level, the number of affected taxpayers which could reclaim the plusvalía tax is around 550,000.

Whilst the law isn’t national yet, we would recommend that you pay the tax and make your reclaim to avoid interest, surcharges, fines, etc. To find out how you can make an appeal download our free guide to plusvalía tax.

Where in Spain has the tax been annulled?

The Constitutional Court has annulled the application of the plusvalía tax in Álava and Guipúzcoa (regions in the Basque Country) for when a property is sold at a loss.

Therefore in this region, from now on the tax only applies in cases where there has been an increase in the value in the land, moreover, the tax will not be applied when the value of the land does not increase or even decrease.

Within these regions, the Constitutional Court considers that when the value of the land decrease, no tax should be paid by the taxpayer.

However, whilst applicable in these regions of the Basque Country, these laws have still not reached state law and therefore the city of Madrid have continued to apply the tax in all cases until a national legislation is declared.

The Plusvalía tax is one of the most important sources of revenue for municipalities and it is estimated to provide an annual 2% of municipal revenues. Because of this, we are seeing delays in the reform of local taxes.

Photo by: Kris Arnold