Capital Gains Tax Exemption in Spain. PLUSVALIA.

Based on a judgment issued by the Constitutional Court, anyone who has sold his or her property (apartment or plots of land) at a loss, that is without any gains on the transaction, is currently exempted from paying municipal capital gains taxes before the city council (it is unconstitutional).

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Recently, the Supreme Court of Justice of Andalucía had adopted this ruling as well for its municipalities, thus, aligning itself with the decision made by similar instances in communities such as Madrid, Valencia and Cataluña.

It is worth mentioning that the Constitutional Court does not eliminate the taxes for those individuals who obtain gains from the sale; it simply clarifies an exemption.

Taxpayers from La Axarquía, in municipalities such as BenajarafeTorroxCompeta, or Torre del Mar are now exonerated from capital gains taxes in case they sell their properties at a loss. We get into the details hereinafter. 

Detailed Analysis

Municipal capital gains tax (Tax on the Increase of Value of Urban Plots of Land): a direct tax on the price of an urban plot of land by its inheritance, purchase-sale or donation.

The payment is the direct obligation of the individual who is selling, regardless if the operation produced economic gains or not. The seller has a period of 30 business days to pay this significant tax before the corresponding city council where the property is located.

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The tax is calculated by the city council without considering the current value of the property, but taking into account the cadastral value of the land, and multiplying the same by the number of years of ownership of the property.In consequence, the numbers always favored the municipal treasury. Additionally, the tax is different according to each municipal ordinance.

That is the main reason why the measure is in dispute in different communities, given the fact that it represents a heavy blow for those affected by evictions, who aside from losing their home, had to face the payment claim of such tax from the city council.

Those affected by the measure shall be able to file a claim only if they paid within the period of four years from the date of payment of the tax in case of self-assessment. Even if we consider this decision, the Ministry of Finance has not issued a statement on this topic.

Although this judgment opens a new path in the case of sales at a loss or evictions, it is worth mentioning that in the case of transfer of property by inheritance or donation, the person who receives the property is responsible for the payment of such tax. Thus, inheritances become a burden for those who receive a plot of land from a deceased person.

We can only wait for the Constitutional Court to solve the different considerations to be presented for this normative through the Courts and Contentious Administrative Chambers.

If you are an affected in this case and you are looking for a solicitor or accountant, you can contact us for more details.

The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.

Author: Rosana Tejada
Biographical Info: Rosana Tejada Crespo is a tax advisor holding a Master’s Degree in International Taxation. She specialises in companies and freelancers, tax regulations concerning foreign employees (Beckham Law), non-resident tax, inheritance tax and Spanish income tax. She is one of the founders of Tejada Solicitors, which comprises a group of English speaking solicitors, economists and architects.

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Capital Gains Tax Exemption in Spain. PLUSVALIA.
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Based on a judgment issued by the Constitutional Court, anyone who has sold his or her property (apartment or plots of land) at a loss, that is without any gains on the transaction, is currently exempted from paying municipal capital gains taxes before the city council (it is unconstitutional).
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Tejada Solicitors
Tejada Solicitors
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