Capital gain, cadastre and taxes increase the final price of housing by 25%
The calculation of the municipal surplus value and the increase of the value of the land by the update of the Cadastre make the taxpayer to pay 25% more of the price of the house.
Buying a property implies a major outlay. The taxes related to the housing suppose an increase of the final price of up to 25% that has to face the buyer. The tax system of housing in Spain brings substantial revenues for the State in the three levels of administration: municipal, autonomous and state.
In fact, in the year 2016, the Autonomous Communities entered only by the tax on capital transfers (ITP) and the tax of documented legal acts (AJD) about 7,230 million euros, 3% more than in 2015 (the best figure Since 2010), according to the website idealista.com.
Both the ITP and the AJD are part of the direct taxes levied on housing in Spain, together with the IBI, VAT, the garbage rate and the controversial municipal surplus value. However, indirectly, other taxes influence the final price of the houses as those related to the purchase of the land in which a building is built or those that are applied in the construction of the same. These rates are assumed by the promoter that impacts them in the final price.
The soil (and its price) is the key. And the cause also of the controversy of the municipal surplus value. In fact, the municipalities are the institutions that calculate this rate taking into account the cadastral value of the soil. The problem is that, until now, the municipalities estimated it considering the value of the land at the time of transmission of the property and multiplied by the number of years elapsed until the sale. The result: the figure always gives positive and must be paid, regardless of whether there really had been an increase in the real value of said property.
In this way, the Constitutional Court recently declared unconstitutional, referring to the Navarre Charter, the application of this model because then the municipal capital gains tax the increase of a value that has not occurred. The market is thus awaiting the pronouncement of this court on the same state law.
If the TC were to reaffirm itself in this position, the calculation of the municipal goodwill would then be estimated taking into account the cadastral value of the soil at the time of purchase. This implies that if the figure were negative, the buyer would not even have to pay any fee; A change that could affect the operations of some 550,000 homes.
The devastating effects of the real estate crisis of 2008 caused that from that date many of the properties sold in Spain were to loss, to which was added the payment of a municipal capital gain that did not collect this fact in its calculation, aggravating the economic disadvantage for the buyers.
If, in addition, the municipalities are updating the cadastral values (which must be done every ten years), the calculation of this surplus value taking into account these new rates would tend to continue rising, impacting twice the buyer.
In this sense, a buyer can claim from the Treasury the undue payment of the municipal goodwill if four years have not elapsed since the disbursement.
An improvement in the taxation of housing that had the effect of lowering the final price, could serve to increase the possibilities of access to housing. The real estate market is growing in recent months but if no measures are taken to facilitate this access will only repeat the errors of the brick with its dire consequences.
In Del Canto Chambers we are specialized in the management and tax claim of real estate before the courts and the Tax Agency. You can contact us at email@example.com.
Claudio Rodríguez Vera (@rvclaudio)
Lawyer at Del Canto Chambers