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Spanish court rules ‘plusvalia’ invalid on sale of devalued property



The Administrative Courts in Spain have begun to annul the ‘plusvalia’ taxes on properties where property values have either devalued or remained static. This will mean that vendors of these properties should not have this tax levied when selling or on transmission of their homes. 

According to the town halls, when selling a property at a loss, you are still expected to pay the Plusvalia tax. (Tax on the increase in value of land) However, the courts are beginning to take a different view.

Articles 104 to 110 of the Law of local taxes approved by the Royal Decree 2/2004 March 5 regulates the taxes on the increase of the value of urban land, known as the ‘Plusvalia’. This is grounded in article 47 of the Spanish Constitution where it states:

”The community will participate in the benefits generated by the urban activities of the public authorities”

According to the article 104 of the above mentioned Royal Decree, the Plusvalia is a direct tax generating an increase by the change of ownership, or any type of transmission including payable on the death of a title holder when the property is inherited by another including in the case of ‘uso fructo’.

Taking the above into consideration, I can categorically state, and without any reservation, that for a tax to be implemented would rely on three elements.

    1. Legal transition of transfer of ownership or the transmission of the property with right to appreciate the results.
    2. The land would need to be urban.
    3. That there has been an increase in the value of the property from the date of purchase to the date of sale.

As stated above, one requirement for a sale to be subjected to capital gains tax would be that the assets had increased in value.

Note that the value is calculated by the ‘valor catastral’ which is revised periodically and not by the real market value. This can be contested and the real value of the property can be used in evidence.

A court in Catalonia had already found in a case that simply put ‘that as there was no increase in the value of the asset’, the sale or transmission cannot be subject to a tax liability.

The above article has been prepared and written by one of our guest lawyers, Davíd Pérez Bernal, of Martinez-Echevarria Perez & Ferrero – Abogados, with offices in Fuengirola, Arroyo de la Miel and Puerto Banus (Marbella).

If you wish to contact Davíd for further advice, please send an email: david.perez@martinezechevarria.com in order to set up a free consultation.



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