On the 16th February 2017, The Spanish Constitutional Court (TC) declared unconstitutional, null and void, several articles of the statutory rule in the Province of Guipúzcoa, regarding the Tax on the Increase of the Value of Urban Land (known as ‘municipal added value’ i.e. “municipal plusvalia”).
The High Court supports the view that the seller of a property cannot be required to pay a tax that levies an increase in value that, in fact, has not occurred. The judgment recalls the doctrine of the Constitutional Court on the principles of Article 31.1 of the Spanish Constitution and reiterates that “in no case can the legislator establish a tax by taking into consideration acts or facts that are not exponents of a real or potential wealth”.
If the rule was to be applied in the whole of Spain, the number of houses that could reclaim the repayment of the “plusvalia”, could number over 500,000 properties.
What is the tax based on?
Municipal plusvalia taxes the increase in the value of the land generated at the moment of the transfer of the property, up to a maximum period of 20 years. To calculate the amount of tax to be paid, only the value of the land at the time of sale and the number years of ownership are taken into account.
Which transactions can be claimed?
This will apply to sale deeds, donations, swaps and inheritances, on which municipal plusvalia tax applies.
Transactions of the last four years can be claimed back.
What documents are need it to claim?
Unfortunately, it will not be as easy as submitting purchase and sale deeds as an appraisal that proves the value of the land of that property will be also needed The Constitutional Court mentions the contradictory expert valuation as an example of valid evidence to demonstrate the loss of assets.
Do I have to pay straight away even if the value is a negative?
It is always recommended to pay the tax and then reclaim your refund to avoid interest, surcharges and fines. For nonresident sellers the buyer will make a retention in anticipation of payment of the tax by the seller.
What is the process to claim?
The first step is a written request for rectification and asking for the return of the tax to the town hall. This letter must include the amount from which the return is requested.
If they do not reply or reject your petition an appeal can be made to the town hall or to file an economic-administrative claim.
Judicial proceedings: In the event that the appeal for reinstatement or claim is dismissed, the administrative route is extinguished, and judicial proceedings are opened. It then proceeds, within a period of two months, to lodge a contentious-administrative appeal before the High Court of Justice of Andalusia (for properties based here).
The High Court of Justice of Andalusia, should in principle and in accordance with the recent ruling of the Constitutional Court, estimate the amount of the appeal and will rule in favor of the refund of the payment of the tax plus the interest caused by the delay.
Our recommendation is to contact a reputable lawyer to help you in the process.