Payback for vendors

Landmark ruling allows owners who sold at a loss to claim back tax

PROPERTY owners who lost money when they sold their homes, premises or land are entitled to claim back the ‘plusvalía’ tax, according to a judgment from the Constitutional Court (TC) in Madrid.

‘Plusvalía’ is a local tax based on the property registry (catastral) value, which is calculated on a fixed local authority percentage and the years the property has been owned.

The judgment notes that the tax was automatically applied by town halls, regardless of whether the land the property stood on had increased in value.

This meant that private property owners and companies were forced to pay for a non-existent and unreal value increase, even when they had sold the property for a lower value than when they bought it.

Plummeting property prices during the economic crisis meant that tens of thousands of vendors were hit by this anomaly, along with families whose homes were repossessed and those who had accepted a donated property.

Vendors and those evicted from their homes discovered that councils had handed them a ‘ plusvalía’ tax bill, even if they had lost money on their property.

The estimation was based on articles 107.1, 107.2 and 110.4 of the national law, Ley Reguladora de las Haciendas Locales.

The TC judgment only applies to those who paid the tax up to four years ago on properties sold with a financial loss or repossessed properties.

The lawsuit was brought by a builder from Jerez de la Front- era, Andalucía who had bought several properties and land repossessed by the bank but was issued with a ‘plusvalía’ tax bill by the council.

Lawyers argued that it contravened article 31.1 of the Spanish Constitution which notes that citizens are obliged to contribute to the Treasury ‘depending on their ability to pay’.

The judge of a local court asked the TC to rule on the case and the judgment is now case law.

The ruling cannot be appealed and is a serious setback for town halls because around 5% of local authorities' income comes from the ‘plusvalía’ tax.

Those affected have to present an official petition in Spanish through their town hall registry, along with a copy of the paid tax bill, to start the claim procedure.

If the council refuses to refund the vendor, court action can be taken.