Municipal Capital Gains Tax | Who can claim it?

The Increase in the Value of Urban Land ( Municipal Capital Gain Tax ) is a tax that municipalities charge to real estate in their transmissions.

This is one of the most painful taxes that there is (if there is one that is not), since it records sales transactions in which there may be losses or inheritances in which the heirs are suddenly burdened with a debt not contracted .

If you are one of those affected, you may have the opportunity to claim your refund.

I explain it to you in this article.

What is the Municipal Capital Gains Tax

The Municipal Capital Gain is a tax that municipalities apply to the increase in the Value of Urban Land (IIVTNU), and is settled every time a property or land changes ownership (sale, inheritance, donation, etc.).

The calculation is made based on the cadastral value and the time elapsed from its acquisition to its transmission, be it a sale, donation or inheritance.

How to calculate the Municipal Capital Gain Tax

Nowadays, it is very easy to calculate the tax on the increase in the Value of Urban Nature Lands (Plusvalía) thanks to the fact that the City Councils have online consultation services.

We are going to carry out an example of calculation of Capital Gains in the Madrid City Council.

First we will enter our data to prepare the calculation.

Calculation of Municipal Capital Gains Tax in Madrid
Initial data to calculate the Tax

Amount of Capital Gains Tax Madrid
Result of the calculation of the Capital Gain of the previous example

When you click on the Generate self-assessment button, you will be presented with the payment document to settle the tax.

Who has to pay the Capital Gain

The Capital Gains tax must be paid by the selling party.

Where to pay the Capital Gains Tax

In the collection service of the Municipal Council they prepare the payment letter to be able to present it at any bank.

Judgment of the Constitutional Court with the Municipal Capital Gain with Losses

This is the most controversial point of this tax, in addition to having losses on the sale, a debt with the council is added.

The problem with this tax is its independence from the profit or loss of the operation. But all this has changed.

The Constitutional Court has issued a ruling that creates jurisprudence in the application of capital gains tax.

This Court rules that no one should pay the municipal capital appreciation when the sale of a home has generated losses .

The explanation that the Constitutional Court offers us in this regard is the incompatibility of the theoretical increase in the value of the properties with the economic capacity of the seller, declaring unconstitutionality and the nullity of arts. 107.1, 107.2 a) and 110.4 of the law.

But we must take into account one of the most important details of this and that is that transmissions of more than 20 years are not subject, since the Tax on the Increase in Value of Urban Land is only tied to ownership for a period from 1 to 20 years .

After 20 years, the IIVTNU is not knotted.

So a detail to take into account is that after 20 years there are no Municipal Capital Gains Tax in any case.

How to claim the Municipal Capital Gain Tax

Since the declaration that the Increase in the Value of Urban Lands can be annulled, taxpayers find themselves in a legal vacuum until a new regulation is approved.

Those who have settled a Capital Gain less than 4 years ago may claim the return regardless of the increase in the value of the land.

According to consulted calculations, it is estimated that taxpayers can claim about 2,500 million euros, equivalent to 4,500 € / affected citizen.

Will you be one of them?

To carry out the first steps of the claim, you must collect all the information regarding the invoices for the settlement of the tax and those for the transfer of the property (deeds, notary, agency, etc).

As a first move, you must submit a letter to the City Council requesting rectification in the collection of undue income from Municipal Capital Gain Tax.

In the event that our petition is rejected within two months, an administrative contentious appeal must be submitted to the Superior Court of Justice of the community.

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