The IIVTNU, Tax on the Increase in the Value of Urban Land, is undoubtedly one of the most controversial taxes in the Spanish tax system, surely you know it as PLUSVALIA MUNICIPAL. This is because after the ruling of the Constitutional Court on October 26, we have known that for many years, its calculation has been unconstitutional by not taking into account article 31.1 of the EC and the principles that derive from it, especially the principle of non-confiscation, which defends not deducting an excessive proportion of the taxed income, this being one of the limits that taxes have in the Spanish legal system.
The declaration of unconstitutionality is based on the objective calculation of the tax, which does not take into account the situation of the market price of the property, which may well be unfavorable with respect to its acquisition. The objective of this calculation is to quantify the increase in value that, due to the transfer or sale, becomes evident. The calculation is produced by applying a coefficient to the cadastral value, said coefficient is obtained by multiplying the number of complete years of ownership, with a minimum of 1 and a maximum of 20, by an annual percentage determined by each City Council. This gives us as a result a tax base that, multiplied by the type of tax established by the City Council, which can be up to 30%, gives us the tax quota.
As we can see, the tax base does not take into account the material conditions of the local real estate market, it presupposes the annual upward revaluation of the property when it is at least complicated that this corresponds to the real situation. But this is only the first of the controversies of the IIVTNU (MUNICIPAL PLUSVALÍA), in addition, we can be subject to this tax without having been involved in the sale of a property since among the assumptions of subjection are being the beneficiary of an inheritance or donation and even the constitution of a real right on the property. We must be very careful when receiving a property for profit, that is, a donation, since we can run the risk of trust that we will not have any type of additional expense and find ourselves with a large unforeseen expense that will unbalance our personal finances.
The Constitutional Court made it impossible to collect this tax by declaring the calculation of the tax base unconstitutional. It established that sections 107.1, 107.2.a) and 107.4 of Royal Legislative Decree 2/2004, of March 5, did not comply with art 31.1 CE, agreeing with all the litigants against the IIVTNU who at that time did not have a sentence firm against. The Constitutional Court is not responsible for establishing the new rules, so it left that regulatory gap unfilled, inviting the legislator to exercise its regulatory power by regulating that gap in the future as it deems best.
Now that you know the keys to capital gains tax and it has become clear to you how it works, do you think you may be affected by the tax?
If you have carried out an operation subject to PLUSVALÍA tax between October 26 and November 10, 2021 and you have paid the tax, contact us so that we can help you claim your money.