'Plusvalía' tax should not be charged if a property loses value

The court decision, which was unanimous, has opened the way for an avalanche of similar claims by people who have had to pay this tax in the past four years.

The decision is dated 11 May and it refers to a case lodged in Jerez in September last year, by a developer who bought land in 2003 to build 73 houses. The project ran into difficulties and Unicaja repossessed the properties, judging them to be worth 50 per cent of their original value. Nevertheless, Jerez council still charged the developer plusvalía land added-value tax on the transaction.

Upon hearing the court decision, the minister for Finance, Cristóbal Montoro, said that the court decision had come at an interesting time, because the government is already looking into council financing, and that the cancellation of this tax in certain cases is an opportunity to improve the taxation system. However, the Hacienda tax authority is unlikely to be enthusiastic about the change, because it will mean lower income for councils and will therefore affect their budgets.