The tax on the increase in the value of land in urban nature (IIVTNU), popularly known as capital gains tax or municipal capital gains tax has become the star tribute in the courts all over Spain. It's a tax figure that apply the municipalities and that theoretically gravel the revaluation of real estate at the time of sale, However, its calculation formula causes will require payment even when losses are recorded.
Many taxpayers have resorted settlements issued by the municipalities and are increasing the sentences that have ruled against the Administration. The last example has as protagonists Eroski and the City Council of Leganés. The Basque cooperative embarked on the project of the Shopping Avenida M40, located in Madrid City and which became a ruin after opening business in 2004. Eroski disposed in 2012 with losses of real property located in this mall, who will reopen this year with new owners and under the name of Sambill Outlet.
The cost of the guarantee
Sources of the Department of Finance of Leganés pointed out that the judgment against it does not mean that the municipality should return the902.000 euros who demanded Eroski for the capital gains tax. They explain that the company did not pay that amount and, Instead, had to submit an endorsement to the Resort settlement. The city council must pay Eroski maintenance of the guarantee –quantified in 51.572 Euro-, and interest calculated provisionally in 6.666 euros. Although, that Yes, the municipality will remain without the 902.000 provided EUR.
While the operation generated losses to Eroski, the city council demanded that the company 902.830 euros for the municipal capital gains tax. The company appealed and the Court of the contentious administrative number 17 Madrid gave the reason. The city appealed, and last January the High Court of Justice of Madrid returned to fail in favor of the company. There is increasingly more jurisprudence which points out that it makes no sense to demand tribute if no benefits have been generated. Councils argue that they simply applying the law, which states that in determining the payable share of capital gains tax, account will be taken of the rateable value at the time of sale and a revaluation rate will be allocated depending on the years in which you have owned the property. Like this, creates the fiction that the goods never lost value. "The legal contradiction cannot and must be resolved in favour of the method of calculation and to the detriment of the economic reality, because that would mean ignoring the principles of equity, Justice and economic capacity", designates one of the sentences pioneers in the High Court of Justice of Catalonia dictated in 2012.
Jose Maria Salcedo, Attorney in legal attic, Remember that longer up to three issues of unconstitutionality have been filed before the High Court. The first was raised by the contentious-administrative court number 3 San Sebastian that urged the constitutional to determine if the capital gains tax violated the article 34 of the Spanish Constitution, It establishes that "all will contribute to the sustainability of public expenditures according to their economic capacity through a fair tax system based on the principles of equality and progressivity that, in any case, will have scope confiscatory". The question of unconstitutionality was raised in the case of an Irun company that sold for 600.000 Euro real estate purchased by 3,1 million euros. Despite the obvious handicap, the Council claimed it 17.899 euros. The Court of San Sebastian also said that the capital gains tax may limit the right of defence provided for in article 24 of the Constitution because the calculation formula does not support test opposite.
Salcedo said that courts of Madrid and Vitoria have recently raised also similar constitutional issues. In the Madrid case, the process has its origins in the transfer of a property that Yes generated added value, However, less than that resulting from applying the tribute. "It is obvious that tax lives his lowest days, It almost always will be a good decision recourse liquidation that turn the Town Hall's turn", Adds Salcedo.
The most controversial tax keys
What is the municipal capital gains tax, When it is applied and who collects it?
The tax on the increase in the value of land in urban nature, known as the capital gains tax, It is a tribute that contributes more than 2.000 million to councils. Applies when sold or donated a property.
In the case of a sale, who should pay the tax? And in an inheritance?
When a property is transferred, is the vendor who must pay the tax on capital gains. In the case of a donation, on the other hand, It is the person who receives the good who must pay tribute to the municipality in which the property is located. Taxpayers who inherit a property also passes through the box of the municipality to pay the capital gains tax.
Why is the tax generating so much controversy?
Because the tribute applies regardless of whether or not a benefit. At the time of the boom, When the vast majority of sales generated capital gains, This was not a problem. However, now, many taxpayers who sell a property do so at a lower price at which he bought. AND, over, they must pay a tax called municipal added value.
How you calculate the capital gains tax?
The tax base is calculated based on the rateable value of the good and the elapsed time in power of the party selling or the donor or deceased, in the case of donations and legacies. An example: a taxpayer purchased a flat in 2007 and sells it now. The rateable value amounts to 150.000 euros. The rate of revaluation - which the City Council determines with certain limits - will be the result of multiplying 3,5 for the nine years in which is has been owner of the good. This figure may vary depending on the municipality. As a result a 31,5% applied to the rateable value of 150.000 EUR leaves a taxable income of 47.250 euros for the proposed example. On this amount would apply the tax rate, which may not exceed the 30% by law. As seen in this case, the formula does not count if the landlord wins or no money from the sale.
What do they say the courts about the legality of this tax?
Increasingly more judgments annul settlements in which a City Council requires the capital gains tax in a deal that has generated losses. We will have to wait for the constitutional position to determine if this local tax legislation is contrary to the Constitution.
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