THE UNFAIRNESS OF THE LOCAL PLUSVALIA TAX IN SPAIN

THE UNFAIRNESS OF THE LOCAL PLUSVALIA TAX IN SPAIN
Dear Readers,
Since the beginning of the twentieth century, each “intervivos” or “mortis causa” transmission of an urban property in Spain, is subject to the payment to the local authorities, of the commonly know “Plusvalia rate”.
a) Who is entitled to pay it?
Very briefly, In the case of a donation or inheritance, the person receiving the property. However, in a purchase transaction, the seller must pay it unless the vendor might be “non-resident” in Spain. In this case, if the seller might default in paying it, the buyer will then also be liable!
(that’s why we always prevent this situation by devising mechanisms aimed to ensure the payment of the tax is always made by the seller on completion at the Notary).
b) How is it calculated?
The main controversy about this tax resides precisely about this question. This is a tax based on the increase of the value of the land from the date the owner acquired the property to the time of the present sale. (Do not get confused with the 3% retention, which is indeed calculated on the actual selling price of the property).
However, due to the significant decline in property prices since 2008 as a consequence of the economic crisis in Spain, local authorities are applying the cadastral value of the property (instead of its market price), basically in order to be able to raise more money from the taxpayer. The reason for this unfair practice is due to the fact that the local plusvalia tax implies an important source of income for all Spanish Town Halls. Likewise, unfortunately for the moment, there is no final judgment rendered by the Supreme Court declaring the illegality of this tax.
Therefore, what is happening at the moment in reality is that local authorities keep charging at the moment “fictitious gains” irrespective of the fact that the property owner might have lost money with his property investment.
In our view, to be obliged to pay for a tax regarding a property that has lost its value not only is illogical but also contrary to the principle of fairness established by article 31 of the Spanish Constitution.
(1. Everyone shall contribute to sustain public expenditure according to their economic capacity, through a fair tax system based on the principles of equality and progressive taxation, which in no case shall be of a confiscatory scope. 2. Public expenditure shall make an equitable allocation of public resources, and its programming and execution shall comply with criteria of efficiency and economy. 3. Personal or property contributions for public purposes may only be imposed in accordance with the law).
c) What can you do about it?
Unfortunately there is very little you can do at present. You can contest if not the application of the tax, at least its amount. However, to do that, bear in mind that you will have to go to the Administrative Court, which will be a lengthy and costly option, with no guarantee of success.
Nevertheless, should you ever need a reliable, 100% independent, honest, cost effective and efficient English speaking Spanish solicitor, to help you with the payment of the local plusvalia, (or with any other legal problem), make sure you bookmark this page, visit our websites: www.ricorabogados.com and www.englishsolicitorinspain.comor alternatively, please do not hesitate to contact us by e-mail at ricorsolicitors@yahoo.co.uk
Remember that you can also follow us in Linkdin or by visiting our google business page: https://plus.google.com/…/10169…/101699650134478147323/postsThank you very much for your kind attention and we look forward to helping you!
Mr Oscar Ricor
“NON-PRACTISING ENGLISH SOLICITOR IN ENGLAND AND WALES”, under the “Solicitors Regulation Authority” (SRA) SRA number 519196 and practicing Spanish Solicitor Nº1247