“Plusvalía Municipal” is declared null when there is no benefit in transmission

Since the creation of this “Plusvalía Municipal” tax, there is an obligation to tax the profits obtained on the sale of real estate, it is paid whether a profit or not has been made on the sale of the property.

However, on last Thursday May 11th, 2017, it was agreed to declare this law unconstitutional at the Plenary of the Constitutional Court and void the legal texts referring to the Tax on the Increase of the value of Urban land (IIVTNU), also known as “Plusvalía Municipal” in particular articles 107.1, 107.2 a) and 110.4 of Royal Legislative Decree 2/2004, of 5 March, approving the consolidated text of the local Finance Regulatory Law.

They were declared void and unconstitutional, but only to the extent that the situation of non-existence of increases in value are subjected to taxation. So, it is unlawful to force tax to be paid when no gain has been obtained in the transmission.

This does not mean that you have not paid anything for the sale of the property, but the value by which you purchased it is equal to or greater than the value for which you sell it, so the result of the difference between both prices is negative, that is, we lost money by selling it at a lower price it was bought for.

This recent judgment reiterates what was established in another hearing at the same court, last Thursday, February 16th, 2017 which declared unconstitutional and null, articles 1, 4 and 7.4 of the Norma Foral de Guipúzcoa 16/1989 of July 5th, regarding to the Tax on the Plusvalía Municipal, only when there are no increases in value.

We must not forget that there is in our system the principle of economic capacity, which plays a fundamental role in this dictum. The same is establish in our supreme norm, the Constitution, clearly stating that all will contribute to the maintenance of public spending according to their economic capacity through a fair tax system inspired by the principles of equality and progressivity that, in no case, will have confiscatory scope.

We clarify that article 107.1 establishes that the tax base of this tax is constituted by the increase in the value of the land, as evidenced at the time of accrual and experienced over a maximum period of 20 years, clarifies that the article will be admissible as long as it respects the principle of economic capacity (article 31.1 of the Spanish Constitution); therefore in order to safeguard said pillar, the tax cannot be imposed in any way on acts or facts that have not caused a real or potential wealth, since otherwise it would not conform to law and would have confiscatory nature.

In addition, the court considers that the tax violates the constitutional principle of economic capacity since it is linked simply with the mere ownership of the land over a period of time and not with added value.

The aforementioned judgments are not intended to deal exactly with the future procedure to prove or argue that said transfer of property did not result in an increase of value for the transferor. For this reason, we will have to stick, in principle, to the most common means of proof so far as they are appraisal or study of architect, among others.

If you are thinking of claiming and recovering this tax already paid do not hesitate to contact Ruiz Ballesteros. We will analyze your case and assess your possibilities. Remember that we must always start with an administrative procedure, in this case, against the Town Hall collector. That is to say you should not go to the administrative procedure before initiating a possible demand. Those who want to go directly to the courts, without exhausting the administrative route, will only waste time and money. In this procedure, it is important to control the deadlines.

Macarena Ruiz

Macarena has studied “ Derecho´´ (Legal Degree) and a Master for “Finanzas´´ (Finances) by the Complutense University of Madrid, as well as a “Máster en Asesoría Jurídica de Empresas´´ (Master in Legal Corporate Advice) by Garrigues (Multinational Company of Legal Services). She started her career working for the ACS group at their offices in New York (USA) in their accountancy department, she came back to Spain to work for the legal contracting department for Mahou – San Miguel and she became part of our team at Ruiz Ballesteros Lawyers and Tax Advisors in 2013. She is an expert in Commercial Contracting and Property Investments, and is part of our Corporate-Commercial Department, speaks English and counts with a wide experience in legal defense.

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