Ministry of Finance Prepares an IBI Hike that will Affect 1,200 Town Halls in 2019

1 October 2018 – El Independiente

The Ministry of Finance has already prepared the list of town halls that will review the cadastral values of their urban properties in 2019. That list includes almost 1,200 town halls, equivalent to 15% of the total. That is according to an Order published in the Official State Gazette (BOE) on Saturday, which also reveals that the update coefficients will be established in next year’s Budget Law, which the Government has not presented yet.

Therefore, despite not having published its annual accounts yet and with the threat that, once they are published, it may have to adopt a more restrictive public deficit path, thanks to the situation it inherited from the previous PP Government, the ministry led by María Jesús Montero has published the mandatory order proposed in the Law to apply possible cadastral value rises that will impact the amount raised by Town Halls through taxes such as the Property Tax (also known as the ‘Impuesto sobre Bienes Inmuebles’ or IBI).

The town halls affected include Badalona (Barcelona), Cádiz, Santander, Guadalajara, Avilés (Asturias), Granada, Huesca, Lorca (Murcia), Coslada (Madrid), Las Rozas (Madrid) and Valencia.

The State’s annual accounts for 2019 are incognito and so it remains to be seen how this review of cadastral values is going to be instrumented.

Moreover, by virtue of the coefficient that is applied, the cadastral value of any given home may increase or decrease. The reason is that the coefficients are established on the basis of the year of entry into force of the last presentation of municipal values, which is basically the document that contains the criteria that are used to carry out the most recent valuations in the region.

Currently, the price per metre squared of private homes amounts to €1,587.9, the highest value since the second quarter of 2012, according to data from the Ministry of Development, which bases its figures on appraisal values.

From this perspective, in general terms, homes valued since that date will have increased in value, whilst those valued between 2008 and 2012, will have decreased. On the basis of the years of entry into force of the values, around one third of the municipalities included on this list belong to the latter group.

A decrease in the number of reviews

The cadastral value of a home is the reference value on which taxes are paid on it at a municipal level for purpose of the Property Tax (IBI), which is one of the main sources of financing for Town Halls.

In this way, unless town halls decide to introduce changes in the tax, bonuses or exemptions, increases in the cadastral value of properties typically mean a heavier burden on the pockets of citizens and, in parallel, more revenues for the town halls.

In order to carry out this review, the interested town halls must make a request each year to apply the coefficients that they establish. To do that, three requirements must be fulfilled: at least five years must have passed since the entry into force of the cadastral values resulting from the previous valuation; there must be substantial differences between the market value and those that serve as the basis for determining the cadastral values; and the town hall must file its request by 31 May.

Having fulfilled those criteria, 1,200 town halls have requested a cadastral review next year, which represents a 14% decrease compared to the number recorded last year. Moreover, that figure equals almost half the number recorded in 2007, when up to a third of all town halls, around 2,500, proceeded to apply new coefficients (…).

Original story: El Independiente (by David García-Maroto)

Translation: Carmel Drake

Greece to Auction Liened Properties to Qualify for Eurogroup’s Latest Tranche

23 January 2018

Despite the good news coming from the Eurogroup meeting, which saw the conclusion of a political agreement to release the fourth tranche of the European Stability Mechanism program, 2018 will be another year of austerity in Greece. The Greek government still needs to implement additional measures which are likely to affect the middle class particularly badly.

The Eurogroup’s political agreement to release a €6.7 billion tranche for Greece will imply further austerity measures. Despite complimenting the Greek government’s policies, and the fact that some targets have not only been met but exceeded, Greece will have to increase its austerity measures, which will fall heavily upon a middle class which has already been hit before.

According to a document containing the Eurogroup’s new demands on Athens, which was reviewed by the Greek newspaper To Vima, the Greek state will have to move ahead with the sale of 10,000 real estate assets later this year and to auction a further 40,000 properties between 2019 and 2021.

According to To Vima, this requirement will inevitably lead to the sale of the primary residences of many families whose mortgages have gone into arrears, which would very likely trigger a wave of social dissent, as the middle class will be especially hard hit.

This Monday, Mario Centeno’s debut as the president of the Eurogroup, Eurozone finance ministers agreed at a political level to unblock part of the fourth tranche of the Greek financial assistance program agreed upon in the summer of 2015.  Total lending under the program could reach 86 billion euros.

However, the release of 1 billion is conditional on the pursuit of “prior actions” that will have to be applied “urgently,” the Eurogroup wrote in the final communiqué following yesterday’s meeting.

After the eurozone’s ministers gave the green light, the European Stability Mechanism (ESM) will also have to review the third periodic evaluation of Athens’ compliance with the Greek memorandum.

The first €5.7-billion tranche could then be released in February, an amount to be used for debt servicing, the payment of debts to suppliers that are currently in arrears and to create a buffer to boost Greece’s cash reserves. This last is considered to be the most critical, as it would aid in Greece’s ability to tap financial markets.

The remaining €1 billion could be released in spring by the European Stability Mechanism, and its German managing director, Klaus Regling, after European institutions confirm compliance with the new measures.

Higher Levels of IRS and VAT on exempt islands

In addition to the need to auction off real estate tied to non-performing loans, the Greek authorities will also have to bring forward a reduction (to 2019, initially planned for 2020) of the minimum level at which Greek taxpayers are subject to income taxes, from around an annual income of 8,700 euros to €5,700. However, this measure will only have to be implemented if the country fails to meet the primary budget surplus target of 3.5% of GDP.

Also, according to the document that To Vima reviewed, in the coming months, Alexis Tsipras’ government will be required to move ahead with a new wave of privatizations aimed at raising a billion euros in revenues. It would also have to impose a further increase in the VAT charged on Greek islands that have so far benefited from a temporary exemption/rebate.

The three-year program is set to expire on August 20 of this year, and between the third review, which is still ongoing, and the fourth review of Greece’s compliance with the memorandum, Athens will also have to implement 88 new measures linked to structural reforms that are being demanded by the troika.

European leaders confident of a happy end to Greece’s troubles

“We have reached a political agreement on the review, an agreement that reflects the enormous effort and cooperation between the Greek government and the [troika’s] institutions,” the Portuguese ex-minister of Finance, Mário Centeno said in Brussels yesterday.

In the statement, the Eurogroup underscored the Greek government’s commitment to reach a surplus of 3.5% in its Budget for 2018 and highlighted the capacity of the Tsipras-led team to exceed the fiscal targets set for the previous three years. It highlighted the improvements in the capacity of the Greek government’s ability to collect taxes and the improved business environment.

In addition to the progress made by Athens, which was highlighted by Centeno and Regling, Spain’s Economy Minister Luis de Guindos said Tuesday that he was sure that the third revision would merit a validation by the ESM. Germany’s Finance Minister Peter Altmaier said he did not see any need for a fourth assistance program for Greece once the current one is completed.

So far, the ESM – responsible for implementing the Greek memorandum – has already disbursed €40.2 billion for Greece. Athens made early repayments of €2 billion. Of the €86 billion rescue, €45.8 billion remains to be disbursed, part of which is earmarked for after the memorandum of understanding’s last revision.

Original Story: Jornal de Negócios – David Santiago

Translation: Richard Turner


Madrid’s Town Hall Prepares To Legislate For Tourist Apartments

30 April 2017 – El Confidencial

The Town Hall of Madrid has decided to take the lead regarding the problem of the proliferation of tourist homes in the capital. Although it lacks the power to introduce legislation (that responsibility lies with the Community of Madrid), the Town Hall’s Councillor for Sustainable Urban Development is working towards signing a Memorandum of Understanding with Airbnb, and the other platforms that operate in the city, to try to put some order to a situation that isn’t showing any signs of letting up. (…).

José Manuel Calvo (pictured above), Councillor for Sustainable Urban Development, plans to have the agreement ready before the end of this legislature.

Specifically, there are three measures that the Town Hall of Madrid is hoping to extrapolate from an example that it has been studying in Amsterdam. The first is “to establish a maximum period of time, be it 60 days, 120 days, etc, that an owner may lease his/her property (home/room) for each year and for the platform to withdraw the property in question from its website, once that quota has been reached, until the following year”.

The second measure involves ensuring that only the owner of a property may lease it out, whereby preventing the involvement of any companies. This will allow “people who need to supplement their mortgage payments, or who need to lease their house to make ends meet, to continue to let out their homes/rooms, but it prevents people from creating tourist accommodation companies without paying taxes, or complying with legislation, etc”.

The crux of the agreement comes in the third measure: “we are considering a tourist tax for tourist homes only, not for hotels, given that hotels already pay taxes, fees, fulfil their obligations etc. Meanwhile, tourist homes do not currently pay any taxes. In other Central European cities, and even in some American cities, some of the landlords’ profits are reinvested in the town, in agreement with the operators”, said Calvo.

With this new revenue stream, the Town Hall could finance the systems of control that it plans to implement to verify that Airbnb and its competitors are complying with the agreed conditions.

But the problem of the touristification or gentrification of the centre of Madrid goes beyond the tourist homes and also affects the proliferation of hotels, to the detriment of residential buildings; another challenge that Calvo wants to tackle by limiting changes of use. (…).

Although he acknowledged that “Madrid faces a very different situation in terms of hotels to Barcelona, Venice and Lisbon (we have 2.7 beds for every 1,000 inhabitants, compared to 8 in Barcelona)”, he also admits that he is worried by the degree of saturation that is starting to be seen in certain neighbourhoods in the centre, where limits do need to start being imposed (…).

“Madrid undoubtedly still has the capacity to increase its hotel and tourist capacity, but, the question is whether that should all be concentrated in the centre, in the same neighbourhoods, where the residential fabric is being pushed out by the increase in hotels and tourist apartments? We don’t think so, we need to diversify. Ideally, they would go towards the Arganzuela district, towards Chamartín, towards Chamberí, to the outskirts, to the other side of the M-30…”.

And it was on this point that Calvo was most belligerent, going as far as to state that he would be willing to set thresholds, to establish limits in those areas where saturation is detected. (…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Town Hall Of Madrid Launches Campaign To Buy 150 Homes

7 February 2017 – El Confidencial

The Town Hall of Madrid, governed by Ahora Madrid, wants to increase its stock of social rental housing. The decision was taken last September by the Board of Directors of the Empresa Municipal de la Vivienda y Suelo de Madrid (Madrid’s Municipal Land and Housing Company or EMVS), but the marketing campaign has not been launched until now.

Its aim is to attract the attention of individuals and companies that are looking to sell off their homes. However, not all properties qualify. Homes must be “free from charges and levies, tenants, occupants and squatters”. In other words, they must be empty. Moreover, the Town Hall has said that it will pay between €65,000 and €160,000 per property. The EMVS is hoping to acquire 150 homes in total (…).

Nevertheless, the Town Hall is not willing to pay any price, not even for those homes located in the best neighbourhoods. (…). It has established fixed prices for the homes it is will to buy, which vary depending on location. In this way, the price per m2 may not exceed €1,300 in Puente de Vallecas and Villaverde; €1,500 in Carabanchel, Latina, Usera, Vicálvaro and Villa de Vallecas; €1,800 in Arganzuela, Ciudad Lineal, Hortaleza, Moratalaz, San Blas and Tetuán, and €2,000 in Centro, Chamartín, Chamberí, Fuencarral-El Pardo, Moncloa-Aravaca, Retiro and Salamanca.

On the basis of these figures, the Town Hall is going to spend, at least, €9.7 million (assuming that it buys 150 homes measuring 50 m2 and pays €1,300/m2 for each one). (…).

To put these figures in context, the price per m2 of second-hand homes in the neighbourhoods of Salamanca and Retiro amounted to €4,590/m2 and €3,734/m2 at the end of 2016, according to data from Idealista. Meanwhile, prices stood at around €1,400/m2 in Puente de Vallecas and Villaverde. (…).

Interested vendors should submit their tenders by 14:00 on 1 March 2017 in the EMVS’s General Registry in Calle Palos de la Frontera, 13. Further information is available on the EMVS website.

Original story: El Confidencial

Translation: Carmel Drake

Pontegadea: Global Political Uncertainty May Impact RE

30 January 2017 – Expansión

Speaking last Thursday (26 January), Roberto Cibeira, CEO at PontegadeaAmancio Ortega’s investment vehicle – highlighted the “significant uncertainty” that exists in the real estate sector regarding the UK’s exit from the European Union. “Depending on what Brexit looks like, the economy will evolve, along with the demand for space. Companies are being very cautious”, said the Director, who was participating in the Third Real Estate Meeting, organized by the IESE.

The UK is one of the top five most important countries for Pontegadea on the basis of turnover; it accounts for a significant proportion of the firm’s business. “London is London, it is always going to be there. We are hopeful and are waiting for opportunities to invest”, said Cibeira, who indicated that the company will continue to focus on the countries in which it already has a presence (Spain, USA, Canada, Mexico, France, UK, Italy, Portugal and South Korea), although growing in Asia “is also a possibility”.

Moreover, the Director said that Pontegadea’s debut on the stock market “goes without saying”, although he did not want to comment further and said that the real estate market in Spain is characterised by three features: “A shortage of supply, a lot of overseas investors and a great deal of competition”.

The Trump Administration

Pontegadea’s CEO was guarded in his comments regarding Donald Trump’s arrival at the White House. “If the country’s economy performs well, then it will be good for everyone. People are still waiting to find out about Trump’s economic policies. The decrease in taxes is good for companies operating in the US and is regarded as a good thing in the short term”, he said.

Regarding the real estate market in the country, the Director said that “it is beginning to explode. But that there has to be a limit to these rent hikes”. The words of Cibeira relate specifically to the rents for stores on Fifth Avenue in New York, where rental prices have risen to $5 million/year per 100 m2.

Original story: Expansión

Translation: Carmel Drake

Hoteliers At FITUR Stand United Against Airbnb

25 January 2017 – Expansión

Same rules of the game / Directors of several major hotel chains are accusing the collaborative economy platform of unfair competition. They are also demanding more regulation and control by the authorities regarding homes made available for tourist use.

Fitur – the major tourism fair – brought together the main players in the tourism sector once again: airlines, hotel groups, transport companies, tour operators, travel agencies and purchasing centres, amongst others. One group of player, who did not attend but who were omnipresent at all the meetings, were online platforms, such as Airbnb. Even the definition of the collaborative economy was generating controversy.

Sources at Madrid’s Hotel Business Association (AEHM), the capital’s hotel trade association, emphasised that the boom in tourist homes is not only a phenomenon that is affecting cities such as Barcelona, although that city is hitting the headlines the most.

“Madrid has seen spectacular growth, increasing from 10,000 to 20,000 homes in one year and from 37,000 to 74,000 beds, although most of those have not been registered”, said the AEHM’s President, Gabriel García. “It constitutes unfair competition for the sector and it must be addressed”, he said.

Gabriel Escarrer, Vice-President and CEO at Meliá, was equally convinced. “There is a lack of regulation in the poorly-named collaborative economy. Meliá spends almost €18 per room in order to comply with regulations, not just in terms of taxes and licences, but also to comply with specific measures such as fire-proofing, security, occupational health and safety. That generates a disadvantage for us with respect to any individual who decides to rent out their apartment; what’s more, in most cases, those apartments do not have a licence or pay VAT”, he said.

For Escarrer, the person responsible “should not only be the owner of the home, but also parties that include such properties on their websites when they do not have operating licences”.

The Director General at the Palladium Group, Abel Matutes Prats, is aware that “we cannot buck the trends”, but, he emphasises that “it is unfair that there is so much regulation for hoteliers and yet a complete lack of regulation, both fiscal and normative, for everyone else. To illustrate the situation, he says that one segment has five referees watching over it, whilst the other has none”.

Antonio Catalán, President of AC by Marriott expresses the same sentiment. He considers that it is essential that the authorities act.

Sources at Airbnb say that they are not opposed to regulation but rather that they require it to “allow people to share their own homes”, in other words, they want “a single legal framework for individuals, distinct from the one applicable to professionals”. And they add: “The existing framework favours professional operators and harms those middle class people and families who want to open up their habitual residence. The collaborative economy needs clear legislation and Airbnb has always been open to working with cities to identify specific solutions”.

Property conversions

(…). “In many urban centres, residential assets are being converted into tourist properties and many cities are just not ready for the change, from the point of view of infrastructure or services. This results in problems for people living together”, explains Escarrer.

For Catalán, the key resides in “what type of city we want, Paris or Cancun, and what we have to do to achieve it”.

“In Ibiza, a type of tourism-phobia is started to emerge, which is hitting hoteliers. We have fewer rooms there than before. We bring fewer tourists than before, with higher quality but less volume. Why are there more tourists? Because of the collaborative economy. We need specific laws, like in New York, to limit the duration of stays and to require tourist apartments to comply with certain minimum health and safety requirements, and moreover, for tax fraud to be prosecuted”, said Matutes.

Airbnb’s sources reiterate that they are “part of the solution” to the challenges that cities are facing: “Airbnb complements the traditional tourist industry and helps to redistribute economic benefits from tourism amongst citizens, communities and neighbourhoods”.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Office Rents In Madrid & Barcelona Are Still Very Competitive

19 September 2016 – Expansión

London: €116.25/sqm – and up to €198/sqm in the West End -. Dublín: €64/sqm. Frankfurt: €45/sqm. Madrid: €34.5/sqm. Barcelona: €28.5/sqm.

Spain’s two largest cities still have the lowest office rental costs in Europe. But, how are these costs calculated and why are Madrid and Barcelona still the most attractive cities in this sense?

A study prepared by the real estate consultancy Knight Frank compares average rents for prime offices, along with occupancy costs, which include amongst other items, taxes, services and establishment costs that companies deciding to open offices in these cities must incur.

For Raúl Vicente, Director of the Office Agency at Knight Frank, “if we compare our markets with those of our European counterparts, then the office markets in both Madrid and Barcelona are still more attractive in terms of costs”.

Moreover, the available supply is also greater and we are currently at a low point in terms of the rental cycle”. The Madrilenian market is proving to be particularly active and the sector may still generate lots of good news between now and the end of the year. Madrid leads the ranking of cities with the greatest potential for rental growth, followed by Amsterdam, Barcelona, Budapest, Lisbon, Milán, Paris and Stockholm.

Average rents have increased in some of these cities, including Madrid, but the price level is still a long way below that of other capitals such as London, where costs soar. The occupancy rate has grown in the Spanish capital by just 1% during the first half of the year and it is noteworthy that no major operations have been signed – i.e. those involving leases for more than 10,000 sqm of space – during the first six months of the year.

Despite everything, the real estate consultants are optimistic and they expect the Madrilenian office market to experience a better second half of the year. Madrid’s capacity to attract businesses is one of the variables that will help this improvement.

Original story: Expansión (by E. Viaña)

Translation: Carmel Drake

Ministry of Finance Raises The Land Registry Of …

2 September 2015 – El Confidencial

The Law protects. It is stated that each year, sheltered from/by the State Budget, it is possible to update the coefficients applied for establishing rateable value of the property. And although the electoral calendar is pressing, with only three months left for the general election, and this measure is not among the most popular because it can result in increased taxes, such as the Property Tax (Impuesto de Bienes Inmuebles, IBI), the Budget for 2016 does not preclude this measure.

“For 2016 the application of adjustment coefficients is expected to increase the rateable value in 1,567 municipalities, comprising 7,021,827 properties, and to reduce it in 126 municipalities, comprising 1,085,053 properties, representing an improvement in the approximation of the assessed values to market values in a total of 1,693 municipalities with 8,106,880 properties, “says the Cadastral Management Program developed by the Ministry of Finance.

As stated in the program, this revision addresses “the need for the Administration to have, through the Real Estate Cadastre managed by the General Directorate of Cadastre, a database constantly updated, in relation both to the basic characteristics of the real estate, and to its value”. That is, the aim is to rectify valuations that have become obsolete.

As stated in the program, this review responds to “the need for the Administration to have a constantly updated database”

“Otherwise,” is added in the program, “it will impair tax purposes which for the community have tributes”, such as the Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas, IRPF), the Transfer Tax/Tax on Patrimonial Transmissions (Impuesto de Transmisiones Patrimoniales, ITP), the Inheritance and Gift Tax and local taxes, such as the Real Estate Tax (Impuesto sobre Bienes Inmuebles, IBI), and the Tax on the Increase of Urban Land Value (Incremento del Valor de los Terrenos, IVT). The higher the rateable value, the more of taxable base and taxes, paid by taxpayers and collected by the Public Administrations..

Clues for the City councils

Updating the land registry is a particularly sensitive issue for the municipalities, who actually formulate request to the Treasury to revise the rates. “This measure is also an important outreach to municipalities and other local entities with the possibility of application of these rates, in order for municipalities to request application of the rates established in the General State Budget Act, as well as those in the successive years”, states the program. If it refers to the application as a possibility, it is because precisely municipalities ultimately decide if the new ratios are put to practice.

In any case, the document does not conceal that the update of cadastres provides a key information for the tax management of local government. “Municipalities need to know in advance the expected results, in both cadastral values,as well as in gross tax bases and net tax bases, so as to approve by tax regulation the adjusted rate of taxation and estimate the fees to be collected. Therefore, municipalities need cadastral data to define and set up their taxation policy regarding the Property tax,” it states.

The revision of rates forms part of the provisions of Article 32.2 of the Real Estate Cadastre Law, which states that “the general budget laws may update cadastral values of urban properties in the same municipality by application of rates based on the year of entry into force of the corresponding property value report of the municipality “. Based on these reviews, the municipalities will request the application of these ratios if three conditions are met. The first, “that at least five years have passed after the entry into force of the cadastral values derived from previous collective evaluation procedure of general nature”. Second, there should be “substantial differences” between market values and those taken in turn in cadastral values. And the third, the request to the General Directorate of Land Registry (Dirección General del Catastro, DGC) should be disclosed  before May 31 of the previous year.

Continues the fight against fraud

But updating assessed values is not the only mission of the DGC in 2016. It will continue with the special Plan of the cadastral regularization procedure from 2013 to 2016, that is, with its crusade to “fight against fraud” cadastral adopted in late 2012 together with other tax measures aimed at the consolidation of public finances.

Specifically, based on technical work done by the DGC, it intended to prevent that the new constructions, expansions of existing ones, renovations or alterations of buildings remained off the radar of land registry. Or what is the same, it seeks to curb “the breach of duty to state correctly and in full by the obligation to do so” with the “ultimate aim to ensure consistency between the cadastral description and the real estate reality”. Let the land registry be a real property map of the present, not of the past.

With this aim, it entrusted to the State Company of Real Estate Asset Management (Segipsa) administration of  the work of this cadastral regularization, a task that has a total cost of 124 million euros, to be distributed in four years, as it covers the period of 2014-2017.

Original story: El Confidencial

Translation: Lee La

No Tax Benefits For Property Buyers Or Tenants

1/12/2014 – Cinco Dias

Tax incentives for property purchase undoubtedly contributed to the real estate bubble inflation which became one of the main culprits of current Spanish economical situation. The Government decided to eliminate tax deduction for acquisition of a main residence which will be preserved retroactively but will not apply from January 1st 2015 onwards. The same reform approved ten days ago rules out taxable profits arising from main home rental and decreases benefits from the buy-to-lease scheme.

Now, tenants can deduct 10.05% of the annual rental amount in their tax filing, given it does not exceed €9.040 in case of a taxable base below €17.707,2. The allowance is also applicable to higher basis until a €24.107 cap, however, once the previous limit trespassed, the incentive is progressively reduced to zero.

Once the new year begins, tax deduction for both property purchase and lease will disappear but it will apply in a retroactive way, i.e. for the homes acquired before 2013 and the rental contracts signed by the end of December 2014.

In 2015, acquiring a property to lease it afterwards will assure an up to 60% deduction for landlords but they will lose the 100% allowance for renting to under-35 tenants.

Pressured to relax the new taxation conditions for capital gains proceeding from property sales, the Ministry of Finance has amended the reform originally eliminating revaluation rates and abatement coefficients, reduced for homes bought before 1995. The latter decreases the tax liability of the capital gain accumulated from the moment of purchase to January 2oth 2006, turning out extremely beneficial for old property sales. The coefficient goes up back in time. For example, if a home was bought before 1986, accrued capital gains as of January 2006 become exempt to the taxation rules. And if it was acquired in 1987, only 11.12% of the revenue will be a subject to the contribution.

Revaluation rates are set to disappear in 2015. The abatement coefficients will remain in force but will only apply to houses sold for less than €400.000. There will be no allowance for an amount above this topline which additionally will be accumulative. This means that the abatement coefficients enjoyed at a sale for €300.000 may be prolonged only to another sale for €100.000.

Given the amendments, it would be to recommendable to sell a house still this year. One must also crunch the numbers as the complete removal of revaluation rates and the restriction of abatement coefficients will be compensated by a reduction in taxes on capital gains. Thus, proceeds from a home sale now are subject to 21% tax for first €6.000, 25% for next €24.000 and 27% above that amount. From 2015 on, the contribution will be reduced to 20% (first €6.000) and to 19% in 2016, furthermore to 22% for following €50.000 and to 24% for the rest (23% in 2016).

Therefore, an owner should take into consideration that if they sell in 2015, they will pay less taxes and if for less than €400.000, there will be no handicap, except for the elimination of the coefficient recognizing the inflation effect.


Original article: Cinco Días (by Nuria Salobral)

Translation: AURA REE

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