The Constitutional Court annuls part of the local tax clauses known as “Plusvalia Municipal” in Spain.

On Wednesday, October 27th, the Spanish Constitutional Court declared the invalidity of part of the “Plusvalia Municipal” articles.

So, what is the “Plusvalia Municipal”?

• In Spain, this local tax, more known as “Plusvalia Municipal, ” is a tax the town hall charges once a vendor sells its property.
• The objective of this tax is to increase the value of the land on which the property stands. Some of which is due to improvements to the area carried out by the local government and the community.
• To calculate the tax value, you will need the property’s rateable value and the number of years that have passed since the property last changed hands.

This tax has sparked a significant controversy that has vibrated the entire country over the years. On October 27th, the Constitutional Court dictated that this tax would be unconstitutional if the seller had registered losses during the purchase and sale of the property.

This decision was mainly taken by the fact that a vendor received a gain of 4.343,66€. After deducting other expenses, the amount was reduced to 3,473.90€, while the required “Plusvalia Municipal” was 3,560.02€, equivalent to 83.89% of the revenue and higher than the actual profit.

Due to situations like this one, the Madrid court annuls the “Plusvalia Municipal” gains if it exceeds the real profit obtained from the sale of the property.