BGI Spain - Municipal capital gains. Exemption from them

What is the Municipal Capital Gain?

It is a direct tax, accrual not periodic, but instantaneous, municipal and voluntary establishment by the municipalities, to whom it corresponds entirely its management.

This tax is charged to obtain an increase in value experienced by urban land obtained as a result of the transfer of their property by any title, or by the constitution or transfer of any real right of enjoyment, limiting the domain, over said land.

Who can claim the Municipal Capital Gain?

The Supreme Court in its recent ruling of 09-07-2018, has ruled on the municipal capital gain and states that it is not legal to collect this tax when the property has been transferred for a price equal to or lower than its acquisition price.

First, it will be the taxpayer who has to show that it had a loss with the transmission of the property, serving as evidence any of those permitted by law, it may serve an expert report, although the easiest and more objective would be to start from the public documents of acquisition and transmission, the deeds, and by difference between value of transmission and acquisition value, we will know if we have had loss or benefit with the transmission.

Once verified that we have had loss (because if there is a profit, the capital gains tax would be liquidated without any novelty in this regard), we will also have to liquidate the capital gains tax and pay it, because until now the town councils are showing reluctance with charging or returning the capital gains; and then request the refund of the tax unduly paid.

Deadline for claiming

If a tax settlement was made (it is the city council that performs the calculation), the period to appeal will be 1 month. After that date the settlement becomes firm. However, if a self-assessment of the tax was made (made at the initiative of the affected person or taxpayer), the period to claim it and request the appropriate rectification and refund of the undue income will be 4 years. The passage of those 4 years will mean the prescription.

How to claim?

1) First, submit a written request to the city council that has claimed the tax, rectification and return of capital gain wrongly charged under the ruling of the Constitutional Court. It is very important that this document reflects the amount that is claimed as an improperly charged capital gain.

2) If the city council rejects your request, the administrative procedure may be initiated by filing an appeal for reconsideration, if any, prior to the economic-administrative claim.

3) In the event that the appeal for reconsideration or the economic-administrative claim is dismissed, the administrative remedy is exhausted and only the judicial means will be available. You will then be able to present the appropriate contentious-administrative appeal, within a period of 2 months, before the Superior Court of Justice of the Autonomous Community that is competent. It must not be forgotten that this legal procedure requires a lawyer and a procurator and involves, therefore, a financial outlay.