News: Spain´s Supreme Court blocks property tax hikes

Spain´s Supreme Court blocks property tax hikes
Written by Inmo Investments - 4 Apr 2016

The Supreme Court in Spain has overturned one of the most controversial taxation policies exercised by the current Valencian regional government.

The system, approved by the previous governmental office in April 2014, allowed the Spanish tax authorities (the Departamento de Hacienda), to review and increase the stamp duty payable on a completed real estate purchase long after the transaction had been completed.

This was achieved by revaluing the property purchased above the price paid, enabling additional tax demands to be sent to thousands of property purchasers in Spain. The tax authorities had sent out more than 55,000 tax demands claiming additional stamp duty amounting to almost €72,000,000. Most of those affected chose to settle the tax demands, averaging at €1,300, but 18,000 buyers filed an appeal against the extra taxation.

One of those appeals came before the Spanish Supreme Court who dismissed the tax demand ruling it illegal. The court described the tax authorities' valuation procedure as “unorthodox and unrealistic", as the calculations were produced using questionable market data and statistics.

In the majority of cases an inspection of the property was not carried out, so the revaluation did not take account of important aspects of the property, such as the condition or the quality of construction. Further, the court judged that the current revaluation model actually used a combination of varying assessment methods, and therefore did not meet the criteria of being a “singular, generic and objective assessment method".

Salcedo Lawyers of Valencia, representing the appeal case, issued a statement “It is not acceptable to deceive the taxpayer by stating that an expert report requires the payment of additional stamp duty, when the expert has not even inspected the property. In reality, all he has done is to make minor adjustments to the value of the property using generic values obtained from statistics".

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