MUNICIPAL PLUSVALÍA (Tax on the Increase in Value of Urban Land)
What is the municipal capital gains tax?
The municipal capital gains tax is a tax applied by the Public Administration that is automatically levied on the transfer of an urban real estate property, whether through a sale, inheritance or donation, among others.
The capital gains tax is levied on the increase in value of a plot of land during the time that the transferor has been the owner.
When is there an increase in the value of the land?
We could consider that an increase in the value of a plot of land is produced when its sale price has been higher than the purchase price.
Unfortunately, and as a general rule, for the Public Administration every sale or transfer of property produces an increase in the value of the land, which is automatically calculated according to the time elapsed between the time of acquisition of the property and the transfer and the current cadastral value of the land.
It is for this reason that we will always be obliged to pay tax.
How can we claim the capital gains tax?
As we have already mentioned, the calculation is made by the Administration to settle the municipal capital gains tax is based on the time elapsed and the value of the land, applying a series of coefficients and multipliers, so the economic values assigned in the notarial deeds are not taken into consideration.
For example: We buy a property for €100,000 and three years later we sell it for €85,000. We see that there has clearly been an economic loss, however, the Administration will require us to pay the tax, because according to their calculations and coefficients, the value of the land has increased.
It is for all these reasons that, finally, after the Constitutional Court’s ruling of 31 October 2019, it was declared that situations of non-existent increases in value could not be subject to taxation.
This ruling has led to an avalanche of lawsuits claiming what was unduly paid through the capital gains tax.
Below, we set out the steps to follow in order to make such a claim:
1- Firstly, we must pay the municipal capital gains tax.
2- Once paid, you have a period of one month to claim the amount through administrative channels by means of an appeal for reconsideration.
The administrative claim is an obligatory step prior to the judicial claim.
Once the administrative appeal has been lodged, the administration has six months to reply. If after six months we have not received a response, the so-called «administrative silence» is produced, which implies the rejection of our appeal. Therefore, if six months have passed without a reply from the administration (administrative silence) or if the reply is directly negative, we can start the last step:
3- The judicial claim, through the contentious-administrative jurisdiction.
Not all cases and claims have the same possibilities. At Imont Legal & Taxes we analyse and evaluate each case in order to guarantee its success.