The municipal capital gain could be reclaimed to the town halls
Numerous courts in all of Spain support the return of the municipal surplus value which current calculation does not consider the real value of property.
The municipal capital gain, or Tax on the Increase of the Value of Urban Land (IIVTNU), is a rate imposed by the municipalities. It taxes the increase of value of any urban property and it is paid by the owner on the difference between the acquisition and the selling price when transferring the property.
owever, numerous courts are increasingly recognizing the unfairness of this rate and are forcing municipalities to repay the amounts collected. The reason is twofold: on the one hand, the calculation of the increase in property value is based on the cadastral value of the land and the application of a theoretical increase, instead of depending on the real purchase or sale price of the property.
On the other hand, during the real estate crisis prices fell by between 30 and 40% and since then, sellers have had to sell the property, many times, at a loss.
As the calculation of the rate by municipalities is based only on assumptions, the result is that there is always some amount to be paid by the seller. They argue that, if a property is sold at a loss, there is no taxable event and, therefore, there is no need to pay the tax.
The amount of those affected is considerable as this tax applies to any type of transfer, be it a sale, donation, barter or inheritance. In addition, the average amount oscillates between 2,000 and 5,000 euros.
In 2010 a court of Cuenca questioned the constitutionality of the method of calculation of this rate. In 2012, the High Court of Justice of Catalonia (TSJC) ruled that there was no obligation to tax if there was no increase in the real value of the property, while in 2016 another court in Valencia denied the taxable event in case of depreciation of the property.
Following this new interpretation, the Superior Court of Justice of Madrid (TSJM) annulled a tax paid of settlement of 96,313 euros.
From a legal point of view, in case of a claim to return this tax, it is recommended to pay it prior to claim it inapplicability. Thus, to prove the existence or not of an increase in value in a property is enough to present the deeds of sale, mortgage appraisals and an expert’s report, if applicable.
If municipalities are calculating the municipal surplus value based on assumptions that do not agree with reality, this rate is, in addition to tax collection, harmful to the rights of citizens.
In Del Canto Chambers we specialize in tax advocacy and tax claims before the courts and the Tax Agency. You can contact us at firstname.lastname@example.org.
Del Canto Chambers’ Editorial Board