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Spain’s Constitutional Court Abolishes CGT When Values Do Not Rise

Posted by: In: Real Estate 23 May 2017 Comments: 0 Tags: , , , , , , , , , , ,
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23 May 2017 – Expansión

The Constitutional Court (TC) has abolished the municipal tax on capital gains when there is no increase in value, in the first case that applies to the country as a whole, after several sentences containing the same rulings were issued in autonomous regions.

The High Court unanimously considers that the tax, which raised €2,439 million in 2015, is unconstitutional in these cases, which have been very common since the outbreak of the economic crisis. In theory, the tax is levied on the appreciation in property values when they are sold but, in practice, it is always paid, even when the properties decrease in value. The TC has not abolished the tax per se, but rather has cancelled its automatic application in the event that there is no appreciation in prices.

The Court considers that the tax on the increase in the value of urban land violates the constitutional principle of economic capacity to the extent that it is not necessarily linked to a real increase in the value of the asset, “but rather to the mere ownership of the land for a period of time”. In other words, the mere fact of having been the owner of urban land for a certain period of time necessarily implies the payment of the tax, even when there has been no increase in the value of the asset and, furthermore, even when the asset value has decreased. According to the Court, this circumstance prevents citizens from fulfilling their obligation to contribute “in accordance with their economic capacity (Art. 31.1 CE)”.

For this reason, the Court has declared the unconstitutionality and nullity of Articles 107.1, 107.2 a) and 110.4 of the aforementioned law, but “only to the extent that inexpressive situations of economic capacity have not been excluded from the tax due to the absence of increases in value”. From the date of publication of the sentence, the legislator is responsible, in his freedom to set legislation, for carrying out the “relevant changes or adaptations to the legal framework of the tax that allow for the arbitration of how to not subject situations involving the absence of an increase in value of urban land to the tax”.

Original story: Expansión (by M. S.)

Translation: Carmel Drake

The post Spain’s Constitutional Court Abolishes CGT When Values Do Not Rise appeared first on Aura Real Estate Experts.

Source:: AURA Real Estate Experts

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