Have you sold a property at a loss in the last four years? We'll tell you if you can recover the amount of the municipal capital gains tax
What is the Tax on the Increase in Value of Urban Land (IIVTNU)?
The Tax on the Increase in Value of Urban Land (IIVTNU), more commonly known as the municipal capital gains tax, is the tax levied on the increase in the value of real estate at the time of sale. However, its calculation formula means that payment is required even when losses are recorded. It is a tax that is always payable, regardless of whether the taxpayer has made a profit or a loss on the transfer of the property.
What was the Constitutional Court's recent declaration of unconstitutionality?
Recently, the High Courts of Justice have been issuing rulings against the assessment of this tax in cases where the taxpayer has not made a profit. Finally, on February 16, 2017, the Constitutional Court declared the municipal capital gains tax unconstitutional when there is no increase in the property's value at the time of transfer. In other words, the ruling states that those who sold their home without making a profit are exempt from paying the municipal capital gains tax, as it is understood that there is no taxable event and, therefore, it is unconstitutional to charge it. However, the ruling does not eliminate the tax altogether, nor does it exempt those who do make a profit from the transfer of the property.
Who can file a claim?
The ruling only affects those who have sold a property at a loss, or those buyers who, through a contractual agreement with the seller or the bank, took responsibility for the municipal capital gains tax.
Those affected must prove that the sale of the property resulted in a loss. To obtain this proof, the deed of sale alone will not always be sufficient to demonstrate that a property was sold at a loss. In many cases, it will be necessary to consult experts or appraisers to conduct an appraisal or technical report on the property's valuation and determine the value that should be attributed to the land at the time of its acquisition and at the time of its transfer.
What is the deadline for filing a claim?
The deadline for appealing the municipal capital gains tax will depend on whether the taxpayer has submitted the self-assessment, or whether the City Council has issued the assessment.
In cases where the taxpayer has filed a self-assessment with the City Council, the standard statute of limitations is four years from the end of the period in which the tax debt must be paid. In other words, the taxpayer will have four years, starting from the day the capital gains tax payment period ended, to request a correction and a refund of the overpaid amount.
However, the deadline is reduced to one month in cases of settlement, meaning that if the voluntary payment period for the municipal capital gains tax has expired and the City Council itself issues the settlement, the taxpayer will only have one month to file an appeal. If they fail to do so, the settlement will become final and no further appeal will be possible.
How to claim a refund of the municipal capital gains tax?
If the taxpayer has submitted the self-assessment, the taxpayer must submit a written request for rectification of the self-assessment of the tax to the City Council that has collected the tax, stating the amount paid, within four years after the date of the settlement.
If the tax assessment was issued by the City Council, a period is granted to respond to the proposed assessment, and it is at this time that the taxpayer must submit the relevant arguments. If the administration subsequently rejects the arguments submitted, the taxpayer will then have one month to file an appeal for reconsideration with the same City Council, and must also pay the outstanding debt.
In both cases, if the response is negative, the taxpayer may file an Economic-Administrative Claim. And if the administrative process is unsuccessful, the taxpayer will have two months to initiate proceedings before the contentious-administrative jurisdiction.
Conclusions
Although each case must be examined in detail, if you incurred a loss from the sale of a property, and this sale took place less than four years ago, you may be able to benefit from the ruling that declared the Municipal Capital Gains Tax unconstitutional.
Therefore, we recommend that those who sold a property at a loss less than four years ago come to our offices and we will inform them of everything necessary to file a claim with the corresponding City Council and recover the amount of capital gains tax paid.
At Àmbit Assessor we are experts in national and international taxation and we would be happy to help you.
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A graduate in Business Administration from the University of Barcelona, she continued her education with a Postgraduate Diploma in Accounting and Management Control from Pompeu Fabra University, and completed various courses in tax and fiscal matters offered by the Terrassa Chamber of Commerce, the Barcelona Bar Association, and the Center for Financial Studies. Before joining Àmbit Assessor in 2001 as a tax and accounting consultant, she worked as an administrative assistant at Caixa Manresa and Banc Sabadell and as a tax information call center operator at the Spanish Tax Agency. For three years, she served as treasurer of the L'Alzinar Recreational and Cultural Society, a position she held concurrently with her work at Àmbit Assessor.
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