Update: Please note that the tax office has now reinstated this tax with a different method of calculation.
The Spanish courts yesterday 26/10/21 abolished Plusvalía tax in Spain on sales, inheritance , donations and any other form of transfer of ownership .
Three or four years ago we wrote about how the courts told the town halls that they could not collect this tax in certain extreme cases which in the end resulted in almost no changes but now it has gone much further. previos article about this
Plusvalía tax is a tax paid to the downhill that has punished sales, ,inheritance and even donations for many years to the tune of between 500 euro for a small flat owned for a couple of years to 8000 or 9000 euro for a villa on a large plot of land that has been held for many years.
Our Spanish high court known as “´Tribunal Consitucional “ has declared that the Plusvalía tax in its present form is unconstitutional.
It considers that the method the law establishes to calculate it ( based on catastral values) is unfair because it is artificial with no correlation with the real increase in value of the properties in question.
This method of calculation goes against article 31 of the Spanish constitution that states that the amount of taxes due must have a direct relation with the economic capacity of the person paying the tax, and with this tax the connection doe not exist.
In principle this sentence will affect transactions that have not yet taken place or deaths the have not yet occurred , and not those cases where the taxes have already been paid or even those cases where the deeds have already been signed or the death have happened and the taxes not paid yet.
The fact that it is not retroactive is based on a press release of the courts but the sentence has not been published for public review yet so we will not loose hope.
My advice therefore is that if you have signed a sales deed but not paid the tax yet or lost a loved one and not paid the tax yet to wait until we have had a chance to read the sentence to see if there is any way we could claim it applicable to transactions or deaths before the sentence.
Likewise those that have already paid the tax during the last 4 years keep your eyes on our blog in case there are any surprises. The chance of claims being made possible for payments already made are small but until the sentence is read in full everything is possible.
This tax is collected and used by the local town halls and this is going to cause them serious financial difficulties. The national tax ministry has declared that as soon as they have the chance to read the sentence in full they will procede as soon as possible to change the legislation creating a tax that is constitutional but at the same time guarantees the financing of the town halls.
Conclusion for now:
If you are about to sell, inherit or donate a property in the near future you will save yourself the plusvalía tax. (This tax can be as low as 500 euro but can be up to 8000 or 9000 euro for villas on large plots held for many years)
If you have already signed a sale or a probate deed but have not yet paid the tax to the town hall I suggest waiting on for as long as possible until we all have a chance to read the sentence.
If you have paid plusvalía tax in the last four years and it has been a substantial amount ,contact us in a couple of weeks jus in case a claim is possible (unlikely but who knows)
The information about it not being retroactive in it’s effects comes from a short press release made by the court, but it has to be taken with a pinch of salt until we have the change to read the full sentence when it is made public.
