Judicial Sanity on Capital Gains Behind Property Sale

Many owners might have already started to lose their mind watching the prices of their property at cadastral level set by the Tresury and applied by city councils as a benchmark for the property tax (IBI).

The cadastral value which provoked during last years a counterproductive effect. In spite of the clear disability, property sale involved corresponding municipal capital gain, the tax on value increase of the urban land has turned into controversial tribute to the root of the real estate bubble.

The Supreme Court of Justice of Catalonia, in the sentence of July 18 2013, rejected the municipal payment in case when there is no real capital gain. “Nonetheless, to the contents of objective rules of share calculation of the Article 107 of the Local Tax Office Act”.

Further it says (…) “the tax regulations are based in the traditional reality – where the production of increments of land value were continuous and significant – and have no reflection in the present situation, in which the value kept declining for a longer period of time, without any improvement outlook”.

Between the second quarter of 2008 and the second quarter of 2011, the property value dropped by 24.6% and, according to the above mentioned regulation, the increase shall be equal to 8.1%. (…) Moreover, the fail implements that the conclusion itself should have been achieved when the surge of value existed, but the amount is “demostrably inferior to the aplication of the said calculation method, infringing the same principles”.

Source: Inmodiario