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Repayment of the local tax on capital gain

The Constitutional Court in its ruling of the 16th February 2017 declared unconstitutional the local capital gain tax in the cases in which the taxpayer proves that there was no increase of the real estate’s value. The local tax on the increase in value of urban land (commonly known as “Plusvalía Municipal”) levies, in the real property transfer, on the increase of the real estate’s value since its acquisition. However, due to the economic crisis, some unusual situations have arisen in which some real estate’s values not only did not rise but it decreased. Especially, what the Constitutional Court stated, is that it is unacceptable that some city councils charge an amount on the increase in value of the land that it has really not happened. And this, is what has happened in some city council, in more or less extend, during the crisis years. This situation has resulted in the insulars having to pay a lot more of taxes in past few fiscal years, and in fact, the more affected city councils by the possible return to taxpayers would be Calvià, Andratx, Marratxí, Llucmajor, Pollença or Felanitx, to name some of them. The City Councils which have collected more, and in a more intense form, are the ones that had revised their ascending cadastre value, taking as reference the moment they were at their highest, that is 2006, 2007, 2008 or 2009, being those the prices before the crisis. Therefore, the tax paid for real estate’s value increase, in case that there was not such increase, can be claimed as such because of the Constitutional Court ruling, which has been found contrary to country’s economic capability regulated by the Spanish Constitution. However, in each case, it should be analysed the opportunity and time to appeal, as should the tax be near its prescription time, such prescription time will need to be interrupted so that the right to get a return in tax  is not lost.    

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