News about municipal tax on capital gains

The Spanish Constitutional Court has recently annulled the municipal tax on capital gains. This tax levies the revaluation of real estate when they are sold but is always paid, although the properties have lost value.

That is why it has resolved that in no case can the legislator establish a tax taking into account acts or facts that are not exponents of a real or potential wealth. In this way, it will force to reform this local tax, technically called Tax on the Increase of the Value of the Land of Urban Nature, and that is considered an important source of income for the municipalities.

The Court considers that it is not legal to impose a tax when there hasn’t been economic gain

The rule that questions the Court imposes a tax on the added value of urban land. This tax is due at the time of sale of the property and is calculated objectively from its cadastral value and from the years (between a minimum of one and a maximum of twenty) during which the owner has been the holder thereof.

The appraiser Tinsa calculates that the number of houses in Spain on which it could be claimed the return of the payment of the surplus value, having been transmitted a value inferior to the one of acquisition would be around 550,000. This figure includes not only sales operations, but also donations, exchanges and inheritances, since these are also taxed with the capital gains tax.


The problem is that many homes were bought at high prices during the years of the ‘real estate bubble’, but their owners sold them during subsequent years of crisis with lower amounts because of the devaluation that occurred in this market. However, at that time many municipalities reviewed their cadastral values upwards and with very large increases taking into account the land values that were applied during the previous boom period. This situation has caused that in the Balearics they have been paying of more in many taxes during the last years.

In this situation, these local taxes should be designed so that new situations in which has not produced an economic gain are not graven or prevent the  taxpayers whose are not actually prove that there was an increase of value.

Hacienda and municipalities are committed to find a solution that satisfies both parties, owners and municipalities.

If you need more information or advice on the return of capital gains, please do not hesitate to contact us. At Ripoll & Mateu Solicitors Mallorca we advise, defend and represent our clients at all levels. Our greatest asset is an infrastructure of professional leaders in each field of action, especially Real Estate and Tax, as well as our international vocation and multilingual capacity.


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