Current situation of the plusvalia tax specially in the Valencian Region
State of the art of the plusvalia tax in Spain
In this post I tried to explain what was the plusvalia situation back then. Summarizing brutally the history was as follows:
- The plusvalía tax is a local tax on the increase of the value of the urban land when this is transferred by any title (sale and purchase, inheritance or donation mainly). The calculation of this tax does not take into account the real gain or loss but only the rateable value of the land at the time run by between one transfer and the following one. So according to the law there will always be a tax bill to pay as the calculation formula is: current official value by time of possession since last transfer = tax bill. Always.
- In mid 2017 the Constitutional Court ruled that the plusvalia was against the principle of the tax paryer’s economic capacity when it was obvious that a value loss existed. This is, when sale price was lower than the purchase price. This was the specific case the Court ruled about. Also, the Court said that the only way to sort this specific case out was with a new Act of the Spanish Parliament. But this new Act is not in place yet.
- From that moment some courts understood that the Constitutional Court had challenged the tax calculation method in such a way that it was void and null in all cases. Other courts understood that the tax was null only when there was no gain for sure. This is when the selling price was lower than the purchase price.
- The Supreme Court finally said that the tax was valid and null only in the cases where there was no gain.
The Supreme Court finally said that the tax was valid and null only in the cases where there was no gain.
New questions to the Constitutional Court
The situation above described was not very clear so one Madrid Court and very recently the Supreme Court have asked again the Constitutional Court. The question now is about the calculation tax method. Is it legal or not as it only takes into account the current rateable value and the time elapsed between one transmission to the following one? You can an article in Spanish about this in this link.
I think an example will show the issue better than any explanation. Let us imagine that you and a friend buy a property each in 2005 for €100,000.00 each property. This is before the real estate and financial crisis. And both of you sell in 2015. You sell for €99,000.00 and your friend for 101,000.00. As the situation is now you would not have to pay plusvalia. But your friend should because there is a gain of €1,000.00. This situation is weird and unjust compared with yours. But even more if the tax bill of the plusvalia is of higher than €1,000.00. That would be confiscatory. And confiscation is prohibited by the Spanish Constitution as well.
Also, what happens when the transmission is not a sale and purchase but a donation or an inheritance? Does it change the situation? Some town halls say that when you inherit an urban property is like the previous value was zero because you did not pay anything for it. That is even weirder. But it is true I am afraid.
How do the local authorities deal with the situation?
An example from my experience will explain it very well I think.
There is a tax agency in Alicante region called “SUMA GESTIÓN TRIBUTARIA” which collects many taxes for many municipalities. When the Constitutional Court made void and null partially the plusvalia tax the agency stop liquidating these taxes completely. That was good. The agency was expecting the new Act of Parliament. But this never arrived. And the tax agency resume to make liquidations ignoring the obvious cases when there was no gain because the purchase price was higher than the sale price.
So the tax payer has to object stating that the tax is against the Constitution and asking to put on hold tax payment for this reason. And the tax agency has one month to respond. And the tax payer expects a satisfactory answer from the tax agency because it is obvious and clear that the tax is against the Constitution. But the tax agency does not answer and after a while they send you a letter saying that you have to pay with penalty interests and surcharges.
And then the taxpayer then has to face the following option. Either pay and later on claim for the money back or go to court and guarantee in any way the debt before the tax agency. Whichever the way implies time and money. And sometimes means that the time and money you have to spend is higher than the tax bill itself. Therefore it is not worth it. So the tax agency collects a lot of money illegally. And if they pay the money back finally to you they have had the money for so long that it is profitable for them.
And there is very little you can do against this disgusting and illegal practice I am afraid. Very little apart from pay and ask for the money back as soon as possible.
I just wanted to denounce this practice. It is terribly sad that our local authorities act against the Constitution in such a shameless way with no consequences. The only consequences are the damage to the citizens and tax payers. But it seems to me that they do not care about that.
Thank you for your time and attention and I hope this information is of use. You are very welcome to share if you liked it.
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.