Tag: Costa del Sol

RTA, andalusian, taxes, occupation licence

RTA FOR HOLIDAY RENTALS IN MALAGA: FINES, TAXES, FIRST OCCUPATION LICENCE AND RURAL PROPERTIES

Written by Gustavo Calero Monereo on 21 May, 2018. Posted in Andalusian, costa del sol, english speaking solicitor, form 210, Occupation licence, Property Tax, RTA, taxes for non residents Spain, Tourism Registry of Andalusia.

It’s been two years since the entry into force of Decree 28/2016 regulating RTA FOR HOLIDAY RENTALS for properties in Andalusia.Half of all holiday rental properties in Andalusia registered before the Tourism Registry of Andalusia are located in the province of Malaga, according to the information published by Diario Sur in February 2018. This means that, in Malaga, there are over 18,000 tourist apartments registered.

It is important to remember that property rentals are subject to taxation

RTA FOR HOLIDAY RENTALS: inspections and penalties

The same newspaper has published that, in Malaga alone, there have been 1,354 inspections and 250 properties have been fined.

One of the most important requirements to be met by these properties is that they must have an initial-occupation licence as well as cooling and heating equipment. Once an RTA / VTAR number has been obtained, the property owner is required to include the registration number in advertising as well as in the promotional page on AirBNB or similar platforms offering these properties as holiday rentals.

Initial-occupation licence requirement

If the property does not have an initial-occupation licence, it should not be registered before them. I use the word “should” because the registration form is an affidavit, for which reason the property owners submitting it declare, under their responsibility, that the property meets all the legal requirements and the Andalusia Council will register the property automatically, without performing any prior inspections. However, if an inspection later finds that the legal requirements are not met, the owners will be fined.

There are many properties without an initial-occupation licence, due to different reasons, such as the age of such buildings, problems with the housing development, etc. This has driven some municipal councils to implement a specific procedure to obtain an initial-occupation licence solely to register the property before the Tourism Registry of Andalusia. Some of these councils are Málaga, Mijas and Benalmádena.

Nerja Council

The situation of holiday rentals in Nerja deserves a special mention. Nerja Council has paralysed the granting of initial-occupation licences since the entry into force of the Tourism Decree.

A month and a half ago, the council also established a procedure to grant such initial-occupation licences only for the purposes of registering properties before the Registry of the Andalusia Council (RTA). The website of the municipal council now includes the form necessary to file this application.

Over one year ago, our firm requested a copy of the initial-occupation licences of different properties in Nerja and, two weeks ago, we started receiving responses from Nerja Council.

Fortunately, the situation of these holiday rentals in Nerja seems to be in the process of being brought in line. This is definitely good news for all interested property owners as well as potential property buyers who will have the ability to obtain the initial-occupation licence necessary for registration.

Properties located in towns with fewer than 20,000 inhabitants

Another significant change that took place recently in the regulations set down by the Andalusia Council is that affecting holiday rentals located in towns with fewer than 20,000 inhabitants. These are towns such as Torrox, Viñuela, Alcaucin, Frigiliana, Competa, as well as most towns in La Axarquía.

Properties in these municipalities are not eligible for the 2016 Decree due to the properties being located in towns with fewer than 20,000 inhabitants. However, since February of this year, it is possible for them to be eligible for the 2016 Decree as they will no longer be considered rural properties, which, until now, was the only way to register these properties as holiday rentals.

RTA list of holiday rentals registered in Malaga

Due to the boom in holiday rentals in certain cities, such as Malaga, the Council has published a list of the registered holiday rentals.

This tool seeks to inform tourists about accommodation possibilities in the city and is also a tool to control the tourism boom affecting the city.

It should be noted that Malaga city is currently experiencing a significant boom in tourism, especially around the historic city centre. This has led to the emergence of plenty of tourist accommodation options, which has resulted in price rises for long-term lettings due to the low property supply as owners opt to offer the properties to tourists instead.

Over the last year, the historic centre has lost residents to holidaymakers. The Malaga Council is already debating the measures that should be taken to limit or regulate holiday rentals and make residential and tourist use compatible, so that residents are not lost and it is possible for people in the community to access rental homes, taking into account the average income in Malaga.

You can see the case of Palma de Mallorca, a city that recently approved a norm prohibiting holiday rentals.

Tax payable on the profits obtained

It is important to remember that property rentals are subject to taxation, for which reason owners –whether resident or not (IRNR)– must declare the profits obtained from such rentals.

Non-resident owners must declare such profits through form 210, which is submitted quarterly. Fortunately, since January of this year, the procedure has been simplified to make it possible to declare, in form 210, all the earnings obtained from renting the existing or new build property as a holiday rental over the quarter, even if they come from different occupants.

If the non-resident property owner owns several properties, a separate form 210 must be submitted quarterly for each one, and 19% of the total earnings obtained will be paid as tax, with the ability to deduct certain expenses according to the period of rental during that quarter.

It is interesting to note that, if you are tax resident in Spain, holiday rentals are taxed at a higher rate than rentals of usual residences –residential rentals–. This is the case because the Tax Agency allows these residential rentals used as the tenant’s usual residence to apply a reduction of 60% over the positive net return obtained from the rental. However, this deduction is not allowed for holiday rentals offered by tax residents.

Currently, there are still many property owners who do not declare rent but, if the Tax Agency devoted some attention to this matter, it could start inspection proceedings ex officio, by simply visiting a few websites and comparing them to the list of properties registered in the Tourism Registry of Andalusia.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

NON-MARRIED LONGEST LIVING PAYS HIGH INHERITANCE TAX

Written by Gustavo Calero Monereo on 29 January, 2018. Posted in Andalusian, costa del sol, english speaking solicitor, heir, Inheritance Tax, lawyer, legal advice, malaga, nerja, Sin categoría, solicitor, wills.

THE CURRENT SITUATION OF INHERITANCE TAX

On 1 January 2018, a new reform of Inheritance Tax entered into force in Andalusia, the main change of which was to raise the tax-exempt amount to one million euros. This new reform changes the reform introduced a year ago, which we explained in our post of November 2016.

Which heirs would be exempt from Inheritance Tax?

Heirs that meet each one of the following requirements would be exempt:

For the heir to be included in groups I and II as established in the regulation governing this tax, the heir needs to be the spouse, child, grandchild or parent of the deceased
For the value of the estate to be inherited per heir does not exceed one million euros
For the pre-existing assets of the heir to be less than one million euros
For the heir to be a citizen of a Member State of the European Union or, if they are citizen from outside the European Union, both the deceased and the heir must reside in Andalusia

What happens with other family members who inherit?

All other heirs, such as siblings, nephews, nieces, uncles, aunts and cousins of the deceased are included in groups III and IV of the Inheritance Tax and will continue to pay the same amounts.

In other words, these heirs will pay inheritance tax from the first euro they inherit except for heirs in group III, who are able to deduct an amount of 7,993.46 euros. This means, for example, that if John leaves his nephew his Nerja property valued at 240,000 euros as inheritance, his nephew will have to pay about 63,000 euros in Inheritance Tax.

What happens if you inherit from your best friend?

You would be included in group IV of this regulation. This means that if John, instead of leaving the 240,000-euro property to his nephew leaves it to his best friend, he or she will have to pay about 80,000 euros in Inheritance Tax.

How are property values calculated for Inheritance Tax for non-married longest living?

Every year, the Regional Government of Andalusia publishes a regulation that establishes certain coefficients to update the values of urban properties located in Andalusia. These coefficients are applied to the cadastral value of the property; this you can find in your Property Tax receipts. The result of applying these coefficients to the cadastral value is what we call the minimum taxable value.

The regulation explained above deals with the minimum taxable value of urban property but, in the case of rural property, this isn´t applicable. Therefore it is necessary to obtain a valuation from the technicians of the Regional Government of Andalusia to calculate the minimum taxable value. However, the Regional Government of Andalusia in the province of Malaga uses the coefficients published every year by the College of Architects of Malaga to calculate the value of rural properties.

Regarding the means used by the administration to calculate the minimum taxable value of properties in Andalusia –as well as other Autonomous Communities–, there is much controversy in general and there is the possibility to challenge those values in the event that the person liable to pay the tax deems them excessive or not adjusted to reality. This topic is complex enough to be covered in a whole new article.

NON-MARRIED LONGEST LIVING OR UNREGISTERED COUPLES IN ANDALUSIA

Who are we talking about?

In the event that a couple is not married –either in their country of origin or in Spain–, if one of them dies and leaves the other member of the couple as an heir, for the purposes of Inheritance Tax this person would be considered to be in group IV. In other words, in this case the partner is considered to be just a friend putting the person in the group with the highest rate of Inheritance Tax.

What happens to common-law partners registerd in Andalucia?

In Andalusia, couples registered in the Registry of Common-Law Partners of Andalusia are equivalent to married couples for the purposes of Inheritance Tax, for which reason they would benefit from the deductions for spouses explained above.

What happens to common-law partners registered in another Member State of the European Union?

In this case, the Regional Government of Andalusia does not recognise such registration for the purpose of Inheritance Tax, for which reason those couples would pay tax as though they had received inheritance from a friend, leaving them in the group taxed at the highest rate.

If John leaves his partner Mark 50% of the property they both purchased in Almuñecar in 2005 and if the fiscal value of that 50% is 120,000 euros, Mark, the heir, would have to pay about 30,000 euros in Inheritance Tax for inheriting 50% of that property.

If John and Mark had been married or registered in the registry of common-law partners of Andalusia, Mark would not pay a single euro for inheriting 50% of the property from John.

What should be done in this case?

If you have property in Spain with your partner and you would like him or her to inherit your part and you are unmarried, we advise that you get married (either in Spain or in your country of origin) so that you can benefit from Inheritance Tax reductions. Those who don´t want to get married, can register themselves in the Registry of Common-Law Partners of Andalusia (Registro de Pareja de Hecho) and then the status would be equivalent to that of a married couple.

Property owners who are not citizens of a Member State of the European Union

In this case, heirs may not benefit from reductions for spouses, children, grandchildren and parents of the deceased, so they would pay Inheritance Tax in the event that they inherit. They can only avoid this if both the deceased and the heir are resident in Andalusia.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

SPANISH INCOME TAX RETURN FOR NON TAX RESIDENTS (IRNR)

Written by Gustavo Calero Monereo on 17 November, 2016. Posted in annual tax, costa del sol, form 210, Income tax for non residents, IRNR 2016, NON RESIDENT, Non residents income tax, non tax resident, taxes for non residents Spain.

Time for payment your income tax for non residents in Spain (IRNR)

If you are a non-resident in Spain and own a property there, you are liable to Spanish Income Tax for Non-Residents payment (Spanish IRNR). This issue was already considered in former article on our website.

You would have to pay this year the IRNR income tax for non-residents of 2015. This means if you owned, bought, sold or inherited a Spanish property in 2015 and you are NOT a fiscal resident in Spain, then you are obliged to pay your yearly IRNR income tax for non-residents this year (Impuestos sobre la Renta de No Residentes). As a service to our customers C&D offers to take care of this tax application and its payment through direct debit before the end of this year.

When a property is owned by a married couple or several persons, each of them becomes an independent taxpayer, so that they should file tax returns separately according to the ownership interest they have on this property.

This tax duty needs to be done before the 31^st of December 2016. If you want to pay through direct debit, though, it needs to be submitted before the 22^nd of December 2016. The tax liability will be calculated with the tax information of your property following the cadastre registry, usually the tax payment it isn’t going to be so much. If you miss this obligation you could be fined by the Tax Authorities.

Tax form 210 is used to pay this tax and it can be downloaded from the official web of the Spanish Tax Authority (A.E.A.T.). It is worthy mentioning that it is not easy to understand them.

Our office is currently dealing with the IRNR season 2015. The deadline to file this tax return expires on the 31st of December of this year. Although if you want to place the payment as a direct debit in your bank account the form must be filled before the 22nd of December.

If you want to hire our services for this tax duty, we will be pleased to help you.

Author: Francisco Delgado Montilla, lawyer at C&D Solicitors Torrox (Malaga / Andalucia)

TIME LIMITATION FOR RESPONSIBILITY: ILLEGAL SUBDIVISIONS RUSTIC LAND ANDALUSIA (DAFO)

Written by Gustavo Calero Monereo on 25 September, 2016. Posted in AFO, costa del sol, illegal building, non developable land, rural land, solicitors Nerja, subdivision, undeveloped land.

illegal subdivision rustic land andalucia

On 6 August 2016, the amendment of article 183.3 of the Urban Planning Law of Andalusia (LOUA) came into force.

The main objective of this amendment was to introduce a statute of limitations for subdivisions in non-developable land that contain buildings. Since 2003, the Administration was able initiate the administrative proceedings for the grouping of these plots divided illegally at any time, which entailed an order to demolish anything built illegally on such lands. There was no time limit, i.e. the legal responsibility never expired.

What this amendment has done is introduce a statute of limitations of six years for such subdivisions, provided that they contain buildings over six years old. This statute of limitations introduced for buildings constructed in non-developable land, results in the legal responsibility expiring after six years without the administration initiating proceedings against such subdivision.

It should be made clear that subdividing rural land means the segregation or division of a plot of land into several more plots, usually for the purpose of selling these plots independently and building there. These subdivisions are illegal unless they comply with the smallest unit for crops, which, in dry lands, is usually between 20,000 and 25,000 square metres. The general idea is to limit plots in rural land from being divided to form new independent properties as much as possible.

This is not a minor issue as, both before and after the passage of the LOUA in 2003, thousands of illegal subdivisions of rural land that did not comply with the smallest unit for crops took place in Andalusia. This situation was widespread until 2009, when the economic crisis put an end to frantic speculation in the property market.

The existence of thousands of such subdivisions led to the sale of many properties originating from illegal subdivisions, which were then transferred to other buyers, whom were also transferred the legal “problem” represented by the possibility of the Administration initiating procedures against them.

This was a situation that created a high level of legal uncertainty, as the offence of dividing such land illegally never expired. The sale of these plots led to the appearance of third parties acting in good faith.

In practice, the Administration in general and City Councils in particular did not have –and do not have– any interesting in pursuing proceedings against these subdivisions to re-establish legality in urban planning. In fact, the enforcement of the resolutions of these proceedings, by grouping all segregated plots into a single property in the Land Registry and in the cadastre, with the demolition of anything built illegally on such plots, seems a complicated task, not to say an impossible one.

In addition to this, the fact that there was no statute of limitations caused a situation of comparative tort, as the offence of having built on non-developable land, on a plot that did not come from a subdivision, would expire after six years. However, if the building was located on a plot divided illegally, the building could be “attacked” with no temporal limit as the offence of subdivision did not expire, i.e. despite the building being over six years old.

I think this amendment is sensible, as it equalises the statute of limitations for plots with buildings and that of buildings constructed on non-developable land. This will lead to greater legal certainty, with the ability to determine the legal regime applicable to these properties clearly.

The logical consequence of this amendment is that buildings that are over six years old and that are built on land subdivided illegally will able to apply for the Assimilated-Outside-of-Planning Procedure (DAFO).

This procedure does not entail the legalisation of the building as the situation of illegality is always maintained but it can lead to greater legal certainty, as the City Council will certify the situation of the property on which legal liability has expired, without the possibility of being “attacked” again by the Administration itself, provided that, of course, no new buildings, renovations or improvements are made on said building.

This recognition, in addition to being a relatively significant financial outlay for the owner, will also entail the certification of a series of limitations for buildings on rural land, despite the fact that, with or without DAFO status, these limitations still exist. It will be up to each owner or new buyer to decide whether he or she is interested in requesting that recognition for the property in question, without forgetting that the City Council can require the owner to initiate it ex officio.

Author: Gustavo Calero Monereo, C&D Solicitors, Malaga, Andalusia

FLOOR CLAUSES MORTGAGES: NEGATIVE REPORT FROM CJEU

Written by Gustavo Calero Monereo on 1 August, 2016. Posted in Andalusian, banks, floor clause, judgment, nerja, solicitors Nerja.

In our last article in May, related to floor clauses, we explained that judicial proceedings before the CJEU (Court of Justice of the European Union) are currently taking place.

The purpose of these proceedings is to decide whether Spanish banking entities have to return all the money unduly charged through floor clauses or, on the contrary, they only have to return the amounts unduly charged after 9 May 2013.

The preliminary opinion of the advocate general taking part in these proceedings establishes that banks should only have to return the amounts unduly charged after 9 May 2013.

The Judgement in these proceedings is expected for late this year and, even though the opinion of the advocate general is not binding, it is usual for the Court’s Judgement to follow the same reasoning.

Regardless of the surprise that this opinion has caused among many lawyers and judges, we must remember that Spanish banks will have to return the amounts unduly charged after 9 May 2013 through floor clauses, and this will not change, regardless of the Judgment of the CJEU, as these proceedings will only decide whether banks will have to return the amounts unduly charged before 9 May 2013 or only those amounts unduly charged after this date.

It is very important for everyone affected by floor clauses in a mortgage to file a judicial claim to recover the amount the bank has charged unduly, as well as to prevent the bank from continuing to charge them more money than the agreed interest rate for their remaining mortgage periods. The success rate in these proceedings is quite high and banks would be ordered to cover court costs caused by these proceedings.

Currently many banks are trying to prevent customers from initiating judicial proceedings by offering false solutions such as agreeing on a fixed interest rate for mortgages. Don’t sign or agree to anything without talking to a specialised lawyer as most of these solutions only seek to keep the bank from having to pay you everything it owes you and make you waive your right to file a judicial claim.

Thanks to our agreement with the Gallego & Rivas law firm, which specialises in banking law, we can study your case at no cost, completing an initial assessment of your documentation and giving you an estimate of the total amount of money you could claim, as well as the money you would save in the future by eliminating the floor clause from your mortgage. This is all with no commitment to hire our legal services.

If you are interested in getting this consultation free of charge, the way to proceed is to contact us at info@cdsolicitors.com, giving us your contact details and sending us a copy of your Mortgage Deed as well as the latest invoice for your mortgage loans. We will be happy to help you and clarify your legal status.

Author: Gustavo Calero Monereo, C&D Solicitors (Lawyers)

NEW REGISTRY HOLIDAY HOMES ANDALUSIA

Written by Gustavo Calero Monereo on 9 March, 2016. Posted in Andalucia, Property law, rentals.

Registration tourist homes in Andalusia — New registry holiday homes Andalusia

A new decree (28/2012, of 2nd of February) about homes for tourist purposes in Andalusia, will enter into force on 12 May 2016. The aim of this decree is to regulate the large market of homes belonging to individuals and let by them as a holiday accommodation at different periods throughout the year.

These lettings, by days or weeks, as well as the use and terms of the lease, were not regulated until now. Therefore, the purpose of this Decree is to ensure that these homes meet a series of minimum requirements to be let, establishing the rights and obligations of both owners and customers and requiring the registration of the homes.

Clearly, this Decree has a significant impact in Andalusia, especially in Costa del Sol and Axarquía, for touristic cities like Granada, Malaga, Seville, and municipalities such as Nerja, Malaga, Torrox, Fuengirola, Marbella, Mijas, etc., which have many homes used for rentals of this type.

What is a home for tourist purposes?

These are homes located on residential land, offered in exchange for a price for the accommodation of people on a regular basis and with tourist purposes. Homes are understood to be let on a regular basis for tourist purposes if they are marketed or promoted in a tourist marketing channel. E.g.: Airbnb, Tripadvisor, Windu, property agencies, etc.

If you are the owner of a home on residential land in Andalusia and, during the year, you offer it for letting for days or weeks, this home will have tourist purposes. Therefore you must comply with the regulations of this Decree if you wish to continue to engage in this activity legally.

Which homes are excluded from this regulation?

Rural homes (houses in the country side) offered for holiday letting are not regulated by this decree. However, they do have the obligation of registering as a tourist home in the rural environment (Vivienda de Turismo en el Medio Rural). Therefore the owners of these homes must also register them before the Government of Andalusia but under a different regulation.

Homes let by the same person for two consecutive months or longer are not considered holiday homes and, therefore, do not need to register. This refers to homes let under a lease agreement for a period exceeding 2 months.

If, during the year, you let your home for over 2 months but you also let it for days or weeks, you will have to register it. Lettings exceeding 2 months and lettings for days or weeks are compatible in the same home.

An exemption to the application of this Decree is established when a single person has 3 or more homes for holiday lettings, within a radius of approximately 1 km. In this case, this Decree will not be applicable and regulations on tourist apartments will apply.

What does this Decree entail?

The obligation to register any home on urban land that the owner whishes to use for holiday letting before the Registry of Tourism in Andalusia. Once the home is registered, a registration number will be issued that must be displayed when offered for letting. The home only needs to be registered once and the registration number can be used for subsequent letting. The owner is the one legally responsible for registering the home and this home can´t be used for holiday letting unless it is registered before the Government of Andalusia by 12 May this year.

What are the registration requirements?

The home must be on residential (urban) land.
It must have a Licence of First Occupation. If it does not have the initial occupation permit, a certificate from the City Hall showing the location and use of the home should be accepted, but we are waiting for the written confirmation of the Junta of Andalusia.
Depending on the season, all accomadations need to be equipped with cooling and heating. In this case, the period for the owner lacking these installations is extended until 12 May 2017 and the property may be let during that period.
The home must have the essential furniture and furnishings required for the total amount of persons it is rented out to.
A first-aid kit is required.
It must have tourist information about the area, showing places to visit, restaurants, etc. A small tourist guide or advertisement from the corresponding tourist office can help you meet this requirement.
It must have complaint and claim forms available to customers in a visible place.
The home must be cleaned upon the check-in of new customers.
Linen and tableware appropriate for the number of people.
Contact telephone number to handle problems and emergencies.
Information and instructions about the appliances/equipment in the home must be available in a specific place.
Information must be provided about internal rules for the use of facilities, according to the regulations of the Residents’ Association (community rules).
The maximum amount of people allowed in the property is 15.
In case you are renting out a room, instead of the entire house, the maximum amount of people allowed per room is 4.
All bedrooms must have external ventilation through windows.

What are the obligations for each customer?

A contract document must be signed by all parties, showing the details of the property, the owner, the number of days of stay and the price of accommodation, as well as the identification of people with a copy of their passports or residence cards. We are talking about a simple document of just 1 or 2 sheets, that the owner must keep for a period of 1 year.

Likewise, the owner must notify the Guardia Civil (police) of the occupation of the home with each new customer. The owner must provide a copy of the contract and the passports/identity cards of occupants.

What happens if I don’t register my home in this registry?

Inspection services may review the situation and begin penalty proceedings. Be careful, because the fine may range from 2,000 to 18,000 Euros.

Furthermore, you have the obligation to allow inspectors to enter the home when they visit it to verify that it meets the requirements for letting. If you do not allow inspectors to enter the home, you could be fined for very serious misconduct, with a large penalty.

What else does this Decree regulate?

Among other things, it regulates the rights of customers in cases where there is a conflict with the owner regarding the price of the letting, check-in and check-out times, advance payments or deposits for letting, etc. Ultimately, it regulates the terms for prices, booking, advance payments and cancellation, unless otherwise agreed in writing between the parties.

Taxes on income received

This registry is of an administrative nature, dependent on the Government of Andalusia and created to regulate the conditions of holiday lettings. It has nothing to do with the obligation to pay taxes on rental income. Likewise, if your home is registered in this Registry but you do not rent it out, it will have no cost to you.

The payment received for letting a home -either for holidays or long-term (longer than 2 months)- must be declared before the Tax Agency, which depends on the Central Government. The income tax you pay depends on the fact wheter you are a fiscal tax-resident in Spain (IRPF tax) of not (IRNR tax).

Legal advice

Even though the Decree will enter into force on 12 May, it is already possible to start the process to register homes in this Registry. If you have one or several properties being let as holiday homes you must register them before the Government of Andalusia. We can take care of processing the documents you need to register your home. We can also inform you about all the requirements that your home must meet and your obligations as its owner. Don’t hesitate to contact us at 0034 – 952 532 582 or info@cdsolicitors.com

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Nerja/Andalucia)

PLUSVALIA TAX PAYMENT WHEN THE ACTUAL VALUE OF CONVEYED PROPERTIES HAS DECREASED

Written by Francisco Delgado Montilla on 10 June, 2014. Posted in Andalucia, costa del sol, Headline, plusvalia, Property law, tax resident, taxes.

Spanish Plusvalia tax decreased value property — Spanish Plusvalia tax with decreased value property

Currently, as a result of the existing conditions of real estate market, the sale price of a real estate property may be below the purchase price or slightly above it.

As regards of these situations and in connection to taxes to be paid when selling a property in Spain, it is necessary to clarify that the increase in urban land values is the first element of the taxable event of the local tax on the increase in urban land values (Spanish acronym I.I.V.T.N.U.), commonly called PLUSVALÍA. Thus, in the event of no increase, no tax may be applied, despite the content of the objective rules for the calculation of the tax provided by Article 107 of Spanish law regulating local taxation (L.H.L.), since no tax liability may arise when an essential element of the taxable event is missing.

The legal liquidation system does not preclude that the taxpayer proves in the specific case that the application of the calculation methods by the Tax Administration leads to unrealistic results. On the other hand, regarding the formula of Article 107 L.H.L., the Supreme Court ruling dated 22nd of October 1994 was conclusive when maintaining that this article was subsidiary, defending and safeguarding taxpayers. According to this Judgment “legal regulations only provide a rebuttable presumption, which is subject to be distorted in each particular case by appropriate and sufficient evidence in the above terms for the taxpayers and in conformance with the provisions of Article 385 of the Spanish Civil Procedural Law. This reasoning, in regards of the actual increase in value(plusvalía) from property sales leading to non-taxation, was also highlighted by the Supreme Court in the Judgment dated 29th of April 1996 and the Judgment dated 22nd of September 2001.

However, a recent Judgment from the High Court of Justice of Catalonia dated 18th of July 2013 also pronounces undoubtedly the fact that town councils cannot charge the plusvalía tax in the event that it does not exist, since the Judge states that when an essential element of the taxable event is missing –as for example obtaining a profit from a property sale—no tax liability to pay plusvalía tax may arise.

Recently, it is being confirmed an increase of court rulings admitting taxpayers’ appeals against tax liability in the event of loss of assets. In the words of Pablo Chico de la Camara, Professor of Financial and Taxation Law: “the caselaw of the Constitutional Court confirms the impossibility to tax a nonexistent taxable wealth by the local authorities”. This situation may occur when the transferor may certify the loss of assets on the occasion of a land conveyance. It is clear for the Supreme Court that the nonexistence of increase in land values precludes the application of the Plusvalía tax.

To sum up, the objective absence of increase of land value may lead to non-taxation, as a result of the nonexistence of the taxable event, since the legal contradiction cannot and should not be resolved in favour of the “calculation method” and to the detriment of the economic reality. Consequently, it would mean the ignorance of the principles of equity, justice and economic capacity.

These same conclusions shall be applied when an increase of the value occurs and the amount of this increase is proved to be lower than the result of applying this calculation method, being the same principles infringed.

These conclusions, which are already supported by several doctrinal criteria and caselaw, shall be considered as unquestionable at present, in view of the aforementioned economic reality.

In SHORT: when it is certified and proved in a specific case that there has not been an economic and actual capital gain from a property sale, the payment of the Plusvalia tax (I.I.V.T.N.U.) shall NOT be required by town councils.

But the reality is that Town Councils are still requiring the payment of this tax despite properties are sold at a loss, so that the judicial procedure is the only chance in this case for taxpayers to “tackle” the payment of this tax. However, when the resulting plusvalía tax payment is relatively low, it is not worth taking legal actions, due to legal costs.

For those who decide to claim, we understand that there are sufficient legal and solid arguments to obtain a favourable judgment.

Author: Francisco Delgado Montilla, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)