New ruling signals the end of unqualified capital gains tax in Marbella
By Salma Hwedi on - 3m. reading time
Translated, Capital Gains Tax in Spain is officially called the tax on the Increased Value of Urban Land (IIVTNU), but most commonly it is known simply as Plusvalía. By definition, the tax applies when you sell a property for a profit and have to pay a percentage on that margin. Yet for several years now town halls across the country have been charging it when there is no profit—or even a loss. A recent ruling by the Constitutional Court in Spain heralds an end to this practice.
When the Spanish Constitutional Court recently ruled that homeowners in Guipúzcoa province of the Basque Region should not have to pay Plusvalía (capital gains) tax, it opened up a welcome can of worms. Welcome, that is, from the perspective of homeowners, homebuyers and investors.
Though the ruling applies in this case specifically to the Basque Region, it is considered to be merely a question of time before it sets the precedent through jurisprudence that will become applicable in all of Spain, eventually resulting to an amendment on a national level. Until then, town halls in regions such as Andalucía would technically be within their rights to continue to charge capital gains tax even when no profit or indeed a loss has been made on the sale of a property. Indeed, they may well choose to do so, for in Málaga province alone the revenue from this source is estimated to be around €135 million per year.
Change in practice
The good news for homebuyers and investors is that it seems that the town halls will soon lose the ability to do this, something that will hit their revenue but give property owners a welcome boost. It is no more than logical and just, for as Spanish Notary, Ramón Blesa says: “If there has been no increase in value this tax is absolutely unjustifiable and incoherent.” After all, it is called ‘Capital Gains Tax’, so if there is no gain it should not apply.
Not only is the situation likely to be challenged soon, but town halls are already counting not just with the impending partial loss of their capital gains tax revenue, but also with the possibility of retrospective claims. They have posted claim forms on their websites (see below) and are bracing themselves for the worst, as in Málaga province alone there could be as many as 35,000 people qualifying for refunds.
Eugenio Martínez-Echevarría of law firm Martínez-Echevarría in Málaga, confirmed that over 600 enquiries have already come into his office over the past month, with many more likely to follow. If you believe you are affected, consult your local town hall website or get in touch with a reputable law firm. If you are thinking of buying or selling your Marbella property in the short term, Drumelia provides clear and comprehensive information and support in your own language. Contact us now.