Spanish newspaper EL MUNDO 17/05/2017
On May, 11th the Spanish Constitutional Court issued a judgment against the payment of the Tax on the increase of Value of Urban Land (IIVTNU), better known as Plusvalía, if the transmission of a property entails economic losses for the seller.
That means that if an owner sells a property for less than he purchased it, the Plusvalía will not be paid.
The Court defends that the seller cannot be required to pay a tax due to an increasing value that, in fact, has not occurred. The number of properties which could claim the Plusvalía back because of having been transmitted without profits are estimate to be around 550,000 according to Tinsa calculations.
This tax is charged by municipalities and is calculated in relation to the value of real estate fixed by city councils through a complex formula and that does not usually coincide with the real market price of the transaction, which has produced a significant discordance in recent years and has resulted in the payment of a Plusvalía (profit on sale) that did not exist. As a result of the bursting of the housing bubble, the price of houses fell considerably and most consistories did not review their valuations, so they have charged a tax that did not respond to reality.
So far, the tax base of the tax to measure the increase of land value that a property is experiencing was determined by applying to the cadastral value of the soil at the time of transmission a coefficient depending on the tenure period of the property.
This new judgment of the Constitutional Court has been issued after that this same Court determined unanimously on February, 16th in Guipuzcoa that this tax was unconstitutional. Now that judgment is applicable throughout the Spanish territory.
The Constitutional Court does not clarify in the content of the judgments which procedure must be followed in order to prove that there was a Plusvalía in a transaction. That is why it is necessary to consider the means of proof presented by the taxpayer in the judgments of the courts issued in this respect and that are favorable to the taxpayer. If you are in one of these cases or do not know if you can be and want us to help you, please contact this law firm.