03 Mar The end of the local tax known as “Plusvalia Municipal” in Spain

In an earlier post, we had already referred to the confiscation of the tax on the increase in the value of urban land, commonly known as “Plusvalia Municipal”. The Constitutional Court has now recognized in the judgment dated 16 February 2007 that the regulation of this tax in the Guipúzcoa Provincial Law 16/1989 is contrary to the constitutional principles of economic capacity and confiscation.

This resolution is going to have great repercussions because the articles declared unconstitutional are similar to articles 107 and 110 of the TRLHL, The Law Tax which is apllied in the rest of Spain.

The Tax on Gains in  Value of Urban Land or “Plusvalia” taxes the patrimonial increase that occurs with the transmission of the real estate. This tax is configured as follows:

–          To carry out a transmission (sale, donation …).

–          A transmission on a qualified urban land.-

–          That is accompanied by a real increase in the value of the soil.-

However, many taxpayers have had to pay this tax even in those cases in which they have not obtained an increase in value, that is, there has not been that “surplus value” that theoretically taxes the tax. This is due to the current discordance between economic reality and fiscal regulations. One of the reasons that has generated this situation is the system configured to calculate the tax. The legislator, established an objective liquidation system based on the cadastral value of the property and not on the equity gain that you get with the sale.

This form of quantification, without taking into account the concrete circumstances of the case, causes a legal fiction that harmed the taxpayers. In addition, since 2002, the property values ​​of the municipal terms, most of them have been increased. This increase is opposite to the current trend of the markets, because since 2008 the sale price of real estate has dropped exponentially. This situation has been aggravated by the fact that when the tax was set up, it was not possible to foresee that the transfer of real estate would lead to a handicap. What at the time of setting up the tax could be seen as an isolated effect, has become a generalized phenomenon due to the current economic situation in Spain.

The Constitutional Court has pointed out that in cases where this real gain is not produced, we are faced with a violation of the economic capacity and non-confiscatory principles recognized in the Spanish Constitution.

In the absence of such gain, the The chargeable event shall not occur. However, local entities continue to demand compliance with the tax obligation. To claim that amount, you must first appeal to the tax agency of the local entity that issued the settlement. In the resolution, it is limited to recognizing the correct application of the regulations when settling the tax. For this reason, it is necessary to file an appeal before the Contentious-Administrative Court. At Navarro Llima Abogados, we are specialized in tax advice, therefore, we make ourselves available to all those who wish advice on how to recover their money.