In Spain, the plusvalía or also known as the Impuesto municipal sobre incremento de valor de terrenos de naturaleza urbana (IIVTNU) or simply “plusvalía municipal” is based on the theory that when a property changes ownership, its value increases over time due to factors such as inflation, urban development and market demand.
However, the application of municipal surplus value has been the subject of controversy in recent years. One of the main concerns lies in its calculation, which is based on the cadastral value of the land and the number of years of ownership, rather than taking into account the actual circumstances of the transaction, such as market fluctuations or improvements made to the property.
Based on this, there have been important legislative changes. The latest was the Constitutional Court’s own declaration of unconstitutionality, in its STC 182/2021 of 26 October 2021, of the tax base of the tax itself, which was discussed in our own blog.
Recently, the Supreme Court has come to establish a new legal basis based on the municipal capital gains tax and its unconstitutionality and has indicated that “the expulsion from the legal system of certain precepts regulating the formula for calculating the taxable base of the municipal capital gains tax (…) does not automatically lead to classifying the payment of the tax as unlawful (…).
Furthermore, the Supreme Court adds that it is necessary for the taxpayer to prove, through the appropriate means of proof, at least one of the following causes:
- a) That the taxable event of the tax has not occurred.
- b) That it has occurred in an amount different to that established by the Administration using the objective assessment method.
- c) That the calculation rules applied were incorrect.
At MDG Advisors we are attentive to any regulatory change, especially in areas such as capital gains, in order to provide accurate advice to our clients to optimise their financial situation and protect their interests in a dynamic tax environment.
Jesús Raya Zamora.
