Big refunds could be on the way for home sellers over “Wrong tax charge” in Spain

Many people have paid a ‘plusvalía’ levy when selling their property, even if its value has dropped, but this might be declared unconstitutional.

After the scandal over the misleading sale of preferential shares in savings banks and the upcoming big payouts to homeowners for ‘floor clause’ interest rate over payments, the next wave of mass financial lawsuits and possible refunds is already on the horizon.

An increasing number of property owners are taking legal action

An increasing number of property owners are taking legal action against local councils over the forced payment of ‘plusvalía’ (increased value) tax when they sell up. Town halls are continuing to charge the seller this tax even if the property is being sold at less or at the same price than the price they originally paid for it. Also, there are cases involving properties in which the sales price was slightly superior to the purchase price but once all the expenses were deducted, there is no gain actually.

The loophole arises as the value of the home that the council uses for it calculation is its ‘valor cadastral’, (official taxable value). Following the pre-crisis property boom, real market values rose well above this official valuation and councils can still therefore keep collecting the money, which is an important source of revenue, even if the seller is losing money.

Legal actions are taken

An increasing number of people are taking legal action against councils. In December, a case was filed against Fuengirola town hall, after a woman who had bought a flat for 220,000 euros and sold for 70,000 euros less still had to pay 5,000 euros of this increased value tax. Our Law firm won this case.

Campaigners against the charges, who are increasing in number, argue that the charge violates article 31 of the Spanish constitution which covers taxpayers’ rights.

In order to study a possible claim, the following documents are necessary:

• title deed of the purchase
• title deed of the sale
• and the proof of value added tax payment.

Hoping this information will be of your interest, I am available for any other information you may need.

Do you want to check the profile of Caroline and get in touch with her, our legal partner in Andalusia?

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Caroline

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Do you plan to buy or rent a property in Spain as a foreigner?

Consult your property tax advisor in Spain first!

In recent times there has been a growth in foreign investment in the Spanish property market and, unfortunately, there are more and more cases in which tax advisors receive the first visit from a foreign client already reporting problems with the Spanish Tax Administration.

Sometimes it is due to ignorance of their fiscal and legal obligations in Spain, and in others, to the contrary: there are small proactive investors who, in good faith, decide to do all the procedures by themselves using the information accessible in the networks. However, the result ends up being the same: the reception of a letter from the Spanish Tax Administration claiming the payment of tax debts that they did not know they had, with the consequent sanctions. What is a pity since, in the great majority of cases, if an advisor had been consulted in advance, a problem if detected upfront, would mean that a difficult (and more expensive) solution would have been avoided.

It must be kept in mind that Spanish tax legislation is characterized by being particularly complex and subject to constant changes, which entails the need to be continually aware of its interpretations and changes. Things like understanding the concept of fiscal residence and its implications; what are the International Double Taxation Agreements, read our earlier article on that: Tax Residence, Why is it important for you? Why do you have to pay taxes in Spain?; What the Non-Resident Tax is and what it consists of; assess whether it is appropriate to be taxed in Spain as a natural or as a legal person and, in the latter case, the steps to be followed for incorporation and annual maintenance; know the different tax rates, possible exemptions, deductions and tax reliefs applicable in each case; to know if it is better to pay the Value Added Tax (VAT) or the Transfer Tax (ITPAJD) when it is possible to choose in the purchase and sale of real estate; etc., are issues that need to be analyzed prior to any purchase.

Yet only in the fiscal area, there are many aspects that must be taken into account before making the decision to make a real estate investment, and which can hardly be dominated by any person who is not specialized in the sector of real estate taxation. Therefore, before taking the step, we strongly recommend that you consult a specialist of your trust.

This article is written by one of our independent partners in Spain, Maite, who is one of our Fiscal partners in Catalonia. Check her profile. Read another interesting Maite and her team wrote on a related subject: Spain property tax: What are the taxes involved in the purchase, holding, and sale of your Spanish property?

Do you want to get in touch with her? Ask us for an introduction and benefit from the power of our network.

Maite

Looking for a real estate lawyer in Spain? Follow the link and get one of our local lawyer.

Looking for another real estate expert in Spain: Mortgage, Insurance, Survey of property, Property hunting, …? Ask us directly one of our 100+ local partner!

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