Action by the Constitutional Court against the Capital Gains Tax
The Spanish Constitutional Court has announced the imminent publication of a ruling that will lead to the repeal of the Capital Gains Tax, as it considers the method of calculation established by law to be unconstitutional.
Possible consequences of the ruling
The elimination of this tax represents a significant saving for those who sell, inherit or donate a property, who are currently obliged to pay this tax to the local councils, as well as a great detriment to all Spanish local councils, which rely on this tax as a major source of funding.
To avoid the possible effects of the repeal of the tax on the financing of local councils, the government has announced that it is working on a draft law change to guarantee the constitutionality of the capital gains tax.
Effects on people who sell, inherit or donate property or are about to do so
We will have to wait a few days to see the full text of the Constitutional Court ruling and the regulatory change announced by the Government to find out how these legal changes will affect people who sell, donate or inherit a property in Spain. But in the meantime, many local councils consulted have indicated that they will continue to charge capital gains tax as long as it is not prohibited. This is why those citizens who sell, donate or inherit a property, or are about to do so, and receive a settlement for this tax, would be well advised to consult a lawyer as, once the ruling and the regulation have been published, tax experts and lawyers, will be responsible for studying them in depth to see what possibilities of appeal they offer.
Effects on people who have already sold, donated or inherited a home in Spain
The Constitutional Court has also tried to reduce the adverse effects for local councils, indicating that the possible nullity of the tax will not have retroactive effects, i.e. it will not be applicable to capital gains taxes already paid.
With regard to taxes already paid, there are two different cases which, in turn, may have different consequences. On the one hand, there are cases in which the tax assessment has been generated by the local council in the form of a letter of payment, in which, if more than a month has passed since the assessment, it is no longer possible to appeal. However, there are also cases where it is the citizens themselves who have drawn up and presented the “self-assessment” of the tax to the Town Hall, and this is where doubts arise regarding the possibility of appealing.
At Imont Legal & Taxes, we will closely monitor the effects arising from this ruling of the Constitutional Court and the Government’s regulatory changes on the economy and the pockets of citizens.