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The main keys in order to claim the capital gains tax
14/06/17

In the process of selling a property there are many aspects that we must take into account beyond the transaction itself, such as making sure we up to date with all our obligations with the Treasury Department. Among these obligations is the payment of the Capital gains tax (CGT). It is a municipal tax that is applied for the sale, donation or inheritance of a property and that implies collecting more than 2,000 million euros per year for municipalities.

The Forcadell Legal Counsel Department can offer us the keys on who can claim the refund of this tax and how to do it successfully.

Who has to pay for it?

It depends on each case. In a purchase-sales transaction, the seller will be responsible for the payment of the capital gains tax. If we are talking about a donation or an inheritance, this tax would be responsibility of the beneficiary, that is, of the new owner

How to calculate CGT

The capital gain tax rate is calculated automatically at the time of sale, or when there is an acquisition through a donation or inheritance of the property. The calculation is made based on the value of the land, marked by another tax that every owner knows: the Real Estate Tax (IBI). CGT tributes based on the years elapsed since the purchase of the property by the seller, donor or deceased, not by the price of the purchase-sale. What this means is that currently, capital gains tax will always force us to pay, regardless of whether we have earned or lost money with the transaction.

The ruling of the Tribunal Constitucional 

With the explosion of the real estate bubble and the arrival of the crisis, the cases of owners who were forced to sell their properties, waiving profits and even taking losses, were extended. Many of these sellers also had to face the payment of capital gains taxes for transactions in which they had lost money.

After a multitude of judicial decisions annulling the payment of capital gains tax in situations of losses, the Tribunal Constitucional (Constitutional Court) has handed down a judgment declaring the capital gains tax unconstitutional for violating the constitutional principle of "economic capacity". This fact will force to change the legislation, giving the option to thousands of sellers to claim the fees that they were forced to pay despite having lost money with the sale of a property.

Who can claim the capital gains tax?

Those people who, in a period not exceeding 4 years, have sold a property which has originated losses are entitled to claim the refund on the payment of the capital gains tax. We must bear in mind that starting this claim process will only be profitable if at the time we paid more than € 2000 in CGT, since it will require the services of a lawyer, a solicitor and an appraiser to certify the value of the property. If we do not expect to recover at least € 2000, it may not be cost-effective.

After a multitude of judicial decisions annulling the payment of capital gains tax in situations of losses, the Tribunal Constitucional (Constitutional Court) has handed down a judgment declaring the capital gains tax unconstitutional for violating the constitutional principle of "economic capacity". This fact will force to change the legislation, giving the option to thousands of sellers to claim the fees that they were forced to pay despite having lost money with the sale of a property.

If we are in the process of selling a home and it is generating losses, as long as the regulations do not change, payment of capital gains tax is mandatory, even if afterwards we issue this claim of payment

Steps to follow

1. Once the capital gains tax payment has been made, we must submit a request for amendment and refund of undue income to the municipality that collected the tax, stating the amount. With this step we initiate administrative procedures.

2. The Administration is obliged to respond by granting us enough time to file an appeal for reconsideration. In case the city council in question has an Economic-Administrative Court, we can also file an economic-administrative claim.

3. At this point we have exhausted the administrative procedure and have two months to start the judicial process through a contentious-administrative appeal filed with the Contentious-Administrative Court and, subsequently, the Tribunal Superior de Justicia de Catalunya (Superior Court Justice of Catalonia)

4. If all the steps have been carried out correctly, the Superior Court Justice should pronounce itself in accordance with the Constitutional ruling and the municipality must pay us the unduly charged tax, adding delay interests to the total amount.
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