Is it feasible to seek a refund of any previously paid municipal capital gains taxes?

Spain’s Constitutional Court has declared several sections of the Law regulating the Capital Gains Tax (the tax paid on the value of the land when sold, a.k.a. the plusvalía tax) null and void. It’s a municipal tax payable to the Town Councils anytime a property is transferred, whether by purchase, sale, donation, or inheritance.

Although the full text of the ruling is not yet available, its implications might be significant, both in terms of future property transfer transactions and in situations where the plusvalía tax has already been paid, and the assessment is not yet final and conclusive. In the latter case, you may be eligible for a return of unearned income.

What is the first thing to do?

It is crucial to determine if the plusvalía tax paid is still appealable.This is the first step because, in theory (and without prejudice to what may be deduced from analysing the Constitutional Court's ruling as soon as it is published), companies and citizens will only be able to ask the Administration for a refund of tax payments made in error concerning those that are not final and conclusive or subject to appeal.

What does "collectable capital gains tax" imply?

Tax assessments are effectively completed when the appeal period ends. Consequently, if a taxpayer receives a municipal capital gains tax assessment and does not challenge it within 30 working days, it becomes “final and conclusive”, which means that the tax is collectable and can no longer be disputed.

Other taxpayers, on the other hand, will have had the good fortune of being allowed to self-assess the tax due to a provision in the municipal ordinance. Such is the situation in the municipalities of Palma and Calviá, for example. As a result, these taxpayers have four years to request rectification of the self-assessment and unearned income refund.

Clearly, now is the time to examine the implications of the Constitutional Court's ruling on a case-by-case basis to evaluate the likelihood of recovering local capital gains taxes paid in previous years.

The tax law department of GARRIGUES, a law firm with vast expertise in conducting such types of proceedings, contributed the material in this post. If you would like to receive further information on capital gains tax refunds, contact the team at Berkshire Hathaway HomeServices Nova Mallorca calling 605 222 222 or sending an email to info@bhhsmallorca.com.