« Plusvalía » Tax declared unconstitutional in certain cases
On the 31st October 2019 the Spanish Constitutional Court issued a significant ruling concerning the infamous “Plusvalía” Tax (Municipal Capital Gains Tax). For those not already aware of it, it is a local tax on the increase in the value of urban land.
The controversy surrounding the “Plusvalía” Tax in recent years is due to the fact that the value assigned to the urban land in question is not the transactional value of the property, but rather a value assigned by local administrations. This means that the actual gain is not what was being taxed in reality, resulting in the tax being levied even in cases where properties were sold at a loss in Spain.
As a result of this uncertainty, brought about by a Supreme Court ruling in 2017, a lot of Town Halls decided to hold off on levying the tax until the doctrine on this subject had been further clarified, though others decided to carry on with business as usual.
In its ruling the Constitutional Court declared the “Plusvalía” Tax to be unconstitutional when it is confiscatory for the taxpayer. What this means, in effect, is that the tax may not be levied where the property is sold at a loss, or even in the event of a real capital gain existing, except when the capital gain outweighs the amount owed in tax.
The final consolidation of this position will come to an end with the approval of the Draft Bill for the reform of the Local Tax Authorities Act, although a lot of the Town Hall’s that had suspended issuing “Plusvalía” Tax bills have already started issuing the bills as of the new Constitutional Courts ruling, in accordance with the criteria laid out in it.
If you have any doubts about whether you are liable to pay “Plusvalía” Tax, or if you may be entitled to claim any amounts already paid, we would urge you to seek qualified legal advice on the matter.
Gabriella Mary Trussler Rowland
4408 Ilustre Colegio de Abogados de Almería