The current economic situation in Spain and specifically in the mortgage market, has highlighted the need to clarify and fix the blurred interpretation that was given in the Law on Transfer Tax and Stamp Duty (Ley del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados) that is paid when buying a house in Marbella and Spain.
In the aforementioned legislation, it is included as an essential element in the loans with mortgage guarantee when buying a house in Marbella, its elevation to public deed, which entails paying the Stamp Duty (impuesto sobre Actos Jurídicos Documentados).
Article 68.2 of the Regulation on Transfer Tax and Stamp Duty (Reglamento del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados), approved by Real Decreto 828/1995 of 29 May, establishes the person to whom the financial entity grants the loan when purchasing a property in Marbella as the passive subject.
Up to this point, all parties, i.e. financial institutions and clients, were very clear about the costs involved in setting up a mortgage loan and that the tax on the loan deed had to be paid to the regional treasury by the client to whom the loan was granted.
Well, now begins the “mess” of mortgages that has had us “entertained” the last dates …
On October 16, the Supreme Court issued three judgments annulling part of article 68 of the Regulation on Transfer Tax and Stamp Duty which reads: “in the case of deeds of constitution of a loan with guarantee, the borrower shall be considered the acquirer”.
This implied and established that the taxable person is not the borrower (customer) but the one who grants the loan and in whose favour the mortgage guarantee falls (financial institution).
From this moment the mortgaged begin to act and ask for the refund of the tax to the regional treasuries for undue income and begin speculations on which moment they have the right to ask for the refund.
Faced with this strange situation, the Supreme Court, in an informative note on 19 October, announces that on 5 November the Plenary of the Contentious-Administrative Chamber will meet to decide whether or not to confirm the sentence.
On October 22, the president of the Supreme Court said that “the sentence is final and not revisable”.
The same day, the associations of financial institutions, AEB (Asociación Española de Banca), CECA (Confederación Española de Cajas de Ahorro) and UNACC (Unión Nacional de Cooperativas de Crédito) stated in an informative note that “the ruling refers to tax matters, that banks have always complied with regulations and with their customers, that credit institutions have not received any amount for this concept, that the banks will comply with the new criteria established by the Supreme Court and finally, that they demand from the public authorities greater legal security and clear and predictable rules for the mortgage market characterized by competitive interest rates and long terms having allowed access to homeownership to a broad spectrum of population.
The plenary session meets on 5 November but does not reach an agreement. Finally on the 6th the Supreme Court agrees that the obligation to pay the tax falls on the borrower (the client).
Finally, the Government states that article 29 is worded as follows: “The purchaser of the good or right and, failing that, the persons who request the notarial documents, or those in whose interest they are issued, shall be a taxable person. In the case of mortgage-backed loan deeds, the lender shall be considered a taxable person”.
The new legislation is applicable from November 10 and tells us that for mortgage loans that are granted to buy a house both in Marbella and the rest of Spain, from now on, the tax will be paid by the financial institution that provides it.
In Benarroch real estate we will be looking forward to what happens with the other costs involved in a mortgage and the reaction of financial institutions to this new cost they must face.