News: Supreme Court Spain: Clients have to pay mortgage taxes

Last October 18, several judges of the Supreme Court decided that not the customers but the banks should pay the mortgage taxes.

That decision was put on the ice by the same Supreme Court the day after the ruling because it would have far-reaching social and economic consequences. Finally, after a consultation and vote by all (at least 28 of the 35) judges on Monday 5 and Tuesday 6 November, it was decided that this and the judgment was not correct, customers (not the banks) should continue to pay the taxes.

But what did the Tribunal Supremo in Madrid actually decide and what are the consequences? It is about who is responsible for paying the "impuestos de la company de la hipoteca" or "Impuesto de Actos Jurídicos Documentados (AJD)", free translation of tax on documented legal acts. With the judgment of the Tribunal Supremo, the situation surrounding these taxes has therefore not changed.

Change of mind

After the ruling of 18 October, where it was decided that not the customers but the mortgage lenders (banks in most cases) have to pay these mortgage taxes, uncertainty arose both at the banks and at the customers. The Supreme Court decided to investigate them immediately after the ruling because it would have far-reaching social and economic consequences.

It is a situation that has never occurred before the Spanish Supreme Court, where its own judgment (which is always binding in principle) has been declared invalid by the same judges. Ultimately, 15 (of the 28) judges decided that customers should continue to pay the mortgage taxes while 13 judges think this should be done by the banks, such as the original ruling of 18 October.

In Spain there is talk of "gana la banca" or the banks win this fight where there is a lot of uncertainty about the impartiality of the judges and the Spanish Supreme Court. There is a feeling among many people that the pressure from the banks and politicians has caused a binding decision to be reversed.

Percentage

Spain has one of the highest Impuesto de Actos Jurídicos Documentados (AJD) of Europe. Various countries such as the Netherlands, Germany and Great Britain do not know these special taxes, while other countries such as neighboring countries Portugal, France and Italy know these taxes but are much lower.

In Spain, the level of the AJD depends on the autonomous state where a mortgage is taken out. In the states of Andalusia, Aragon, Cantabria, Castilla y León, Castilla-La Mancha, Catalonia, Extremadura, Galicia, Murcia and the Comunidad Valenciana 1.5% are asked.

In Asturias and in the Balearic Islands, this is 1.2% while this is 1% in La Rioja. The Comunidad de Madrid and the Canary Islands have a percentage of 0.75%, which is even lower at 0.50% in the Basque Country and Navarre.

With these percentages customers pay an AJD for a mortgage of 120,000 euros between 600 and 1,800 euros and in the case of 150,000 euros between 750 and 2,250 euros.