This article explains a case law with regards to the plusvalia tax in Spain. What is the situation when the Tax Office send you a tax bill for the plusvalia tax when you transfer your property losing money.
As you all know by now the plusvalia is basically a Spanish municipal tax on the increase of the value of the urban land which arises when the property is transferred in any way.
You can check my other posts about the plusvalia here, here and here where I turmoil this tax has suffered since 2017 when the Spanish Constitutional Court made void some parts of the tax due to the very funny way of calculate it.
Briefly the Constitutional Court said that when a property is sold transferred by less value than the acquisition one it is obvious that there is no gain at all and therefore no increase of the value of the urban land because the land along with the construction it is a whole. That is definitely clear then. Furthermore, the Supreme Court ruled afterwards that to show the lack of gain would be sufficient in general to compare the acquisition deed (purchase deed for instance) and the transfer one (sale deed for example). So, if I buy for 100 and sell for 60 there is no gain at all. Because there is always a proportion between the construction (if any) and the urban land. So if the price is 100,000 and the value of the proportion of the urban land on the full price is 10% then the value of the land is 10,000. And if the sale price is 60,000, the proportion will be the same so the urban land will be worth at the sale only 6,000 so the loss is obvious. There is no increase of the value of the land at all (unless tha Tax Office shows that that specific urban land of yours is worth more at the sale time than at the purchase one).
Many local Tax Offices however keep issuing plusvalia tax bill as if the Constitutional Court have said nothing. This forces the taxpayers to defend before the Tax Office making objections, paying the illegal tax bills and claiming later the monies from the Tax Offices, or giving guarantees to cover the liability of illegal tax bills.
And all of us know that this is very difficult to do when you are a not a resident in Spain and you have to deal it with this issues from abroad. Actually, it could be no worthy to fight because you need professionals to do it for you. This means time and money. Besides, plusvalia tax bills usually are not of high amounts so it makes it many times unworthy to fight but for the principle.
Some of these situations I came across and I make objections on behalf of my clients because this is very unjust. But the Tax Office just ignore them and actually do not respond to the objections and start the execution procedure because a tax bill is enforceable in principle. So if the Tax Office do not respond to the objections against an illegal tax bill the tax bill is enforceable as a general rule. Tricky. I know. So they go on.
I got fed up
So finally, I got really fed up (and my clients even more!). So I thought well, maybe the Tax Office is committing a criminal offence call prevarication which is when a civil servant makes an illegal decision consciously. In our case, to make illegal tax bills when there is no gain in the property transfer. And they are illegal because the Tax Office in most of the cases if not all know exactly which one was the value of acquisition. So they know both the acquisition and the transfer value and therefore they know that there is NO GAIN in many cases. But the Tax Office keep happily issuing illegal tax bills.
So it is really the Tax Office committing a criminal offence?
Well, the Tax Office itself not really but the individual civil servants responsible for the tax bills yes.
If the Tax Office is a criminal or not is not on me to decide but on the courts.
The only thing which is up to me acting on my client’s behalf is to make the corresponding denounces to the courts. And I did. And some of them have been accepted and an investigation is ongoing.
The good news at this stage are two:
- When the investigation finishes we will know if these situations are criminal offences or not, and
- It is a warning for the Tax Office that there are some limits. The Tax Office cannot act ignoring a Constitutional Court ruling. No way. Actually, the administration has to be act according to the law more than anyone.
I will keep you updated on this interesting point in my opinion.
And as I always say each individual case is different and have to be assessed carefully by an expert lawyer.
Thank you for your time and attention and I hope this information is of use.
Please, note that this is general information. This is not specific legal advice. It is advisable to seek legal advice for any specific legal issue.
And remember, take care and stay alert.