The constitutional court declares unconstitutional the articles that refer to the local capital gain tax which are contained in the regulation of local tax authorities.

The local capital gains tax is due when a property is transferred, for example in a sale or inheritance. The tax is based on the value increase of urban plots and the vendor pays it. The tax is regulated in articles 104, 107 and 110 of the local tax authority regulation.

The sentence of the constitutional court from the 11th of May 2017 declares articles 107.1 and 2a) and 110.4 as unconstitutional and invalid because the tax is based on a supposed increase of the plot value and in many cases the increase is non-existent. This situation was contradicting article 31.1 of the Spanish Constitution.

This means that the local capital gain tax itself is not unconstitutional but it’s application in cases where a value increase is non-existent. The value increase needs to be proven with the corresponding public transmission document and will be revised by the tax authority.

From now on, we will have to pay special attention to the application of the local capital gain tax as it is now regulated by other parameters. All this is still very new and we need to wait a little bit more until we receive the definitive legal guidelines for the correct application of the tax.


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