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The cessation of capital gains tax and its effects

The Constitutional Court has declared the unconstitutionality and nullity of articles 107.1 second paragraph, 107.2 a) and 107.4. In other words, the so-called municipal capital gains tax ("plusvalía municipal" in Spanish) will no longer have effect since it has resolved the impossibility of calculating the increase in the value of the home.

Tax on the increase in value of urban land

It consists of the budget increase of the value of a property from the acquisition to the transmission of this. It applies to the sale, donation or inheritance of a property; and must be paid to the town hall where it is located. In case of sale, the seller must pay the amount. On the other hand, in the cases of donation and inheritance, those who receive the property have to bear the expenses.

For municipalities, the collection of the tax is essential for their financing, since it contributes more than 2,000 million euros to the municipal coffers.

- Engel & Völkers

Effects of the elimination of the municipal capital gains tax

The ruling of the Constitutional Court, which does not have retroactive effects, will affect all those housing sales operations that are carried out from now on and the resources that are already processed.

Likewise, it will entail a series of advantages for all those who are going to carry out a property purchase and sale operation:

  • Greater agility in home sales operations by not having to pay the tax
  • Greater accessibility to housing facilitating the balance between supply and demand

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