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Real Property Tax Will Never Disappear

26/09/2014 – Cinco Dias

The real property tax is an agile survivor in the Spanish taxation jungle. Established in 1978, it got an ‘extraordinary’ and therefore ‘transient’ label. In 2008, the Government of Spain led by Jose Luis Rodriguez Zapatero approved its abolishment convinced by the argument that the tax opressed the medium class rather than the affluent part of the society which disposed of all sorts of tricks to dodge the payment.

However, the economic recession pushed the authorities towards reviving the contribution in 2011 and 2012. Thus, the tax increased the treshold exemption amount from €120.000 to €700.000. After the two years had passed, it was supposed to disappear.

But this has never happened. Mariano Rajoy and his Government rolled over the tax’s force twice and made it valid until 2014. If not extended to 2015, the contribution will go away. However, the chances are that the Property Tax is here to stay as the Government prepares a blueprint renewal for the following year, included in the 2015 Budget Plan.

Presently 173.505 taxpayers contribute in all regions of Spain. Some of the public administrations like Madrid can apply a 100% tax rebate. In practice, it means that the residents of the Community of Madrid do not pay the property tax.

Experts recommended that the tax be entriely abolished by the Ministry of Finance. However, the authority focused on amendments in the Personal Income Tax (PIT), the Value-Added Tax (VAT) and social contributions, leaving the question concerning the real property contribution in limbo.

On the other side, great majority of Spanish regions voted for underpining the tax for at least one year more.

The latest update reveals that each year the Goverment collects €1 billion from the property tax, which additionally helps the regions to fill-in the overall deficit. Last year, it averaged at 1.5% and it must be suppressed to 1% this year, to 0.7% in the following and to 0.3% in 2016.

Due to the 2008 abolishment, the Government was obliged to pay around €2 billion annual compensation to the Spanish regions. For this reason, earnings proceeding from the tax recovery should be returned to the State. Right now, they both keep the compensation and the collection.

 

Original article: Cinco Días (by Jaume Viñas)

Translation: AURA REE