There's never a dull moment in Spain's residential property market! When newspaper headlines aren't throbbing with indignation over corrupt planning officers and Spanish lenders not passing on savings in interest rates to mortgage customers, there must be something else lurking in the murky waters of the Spanish legal system...and clearly there is: a new scandal is unfolding, this time over past home sales, where the wrong capital gains tax on properties may have been applied by over-zealous town councils.
It seems that many vendors were forced to pay a “plusvalia” levy when they sold their Spanish properties. This tax was applied even when the value of the Spanish home had fallen considerably. However, it seems that this practice may be declared unconstitutional by Spanish courts. Should that happen, past vendors selling their Marbella villa or apartment for less than they'd bought it for could be in for a big refund.
Spanish homeowners have barely managed to overcome the shock that for many years Spain's lenders got away with the misleading sale of preferential shares in savings banks . Nor have many home owners been able to collect refunds yet from lenders who used the infamous “floor clause” in mortgagees' contracts to hold on to savings, when interest rates had dropped significantly and said lenders should have passed on such overpaid interest charges to their mortgage customers.
Now the country's legal system is bracing it self for the next tsunami of financial lawsuits and mass payouts of refunds owed to home owners. It appears that an increasing number of Spanish home owners are taking legal action against local councils, because they forced vendors to pay the much-hated “plusvalia” (increased capital value) tax, even when properties were sold far below their original value.
Another Legal Loophole needs to be plugged in Spanish Property Legislation
Councils determine the taxable value of the home by basing their calculations on the home's “valor catastral”, the official rateable value of a property. Trouble is, this rate was set before the property market crashed in 2008 – at a time, when Spain's booming property market meant that councils were raking in lots of money, because property values had risen so much. But since then, most vendors have had to drop prices considerably in order to sell their homes, even in real estate markets that weathered the storm better than others, such as Fuengirola or the ever-popular Marbella for example.
Now more vendors are taking legal action against councils still clinging to their “valor catastral” rights. In December 2016, a court found against the town hall of Fuengirola in the case of a lady who had purchased an apartment for 220,000 euros and had to sell it for 70,000 euros less than she had paid for her property. She was still forced to cough up 5,000 euros in increased value tax, despite having lost out massively on the sale.
Campaigners taking legal action against what they argue to be an unfair taxation are hoping that the tax will be declared unconstitutional. Should Spanish courts decide that this is indeed so, and take the ruling against Fuengirola town hall as a precedent, there could be a wave of new payouts to past vendors. Such an important ruling could breathe new life into the country's housing market, for new home owners would know that, if they decided to sell up at some point in the future, they would be taxed fairly and not according to a capital gains tax rule that predates the market crash of 2008, when Spanish property prices were at their peak.