After weeks of court rulings and controversy the government has stepped in to overrule Spain’s Supreme Court’s decision over mortgage tax liability.
The Impuesto sobre Actos Jurídicos Documentados (AJD) is a tax paid on certain documents, including mortgages, which are signed before the notary. The amount payable is calculated on a percentage of the mortgage guarantee, a figure which varies from region to region – in Andalucia the percentage is around 1.5% and is payable by the borrower.
In October, a case went to court to change the legislation and put the onus on the lender (the bank) to pay the tax because the documents protect the banks in cases of foreclosures and therefore should not be the responsibly of the borrower. The court ruled in favour of the borrower and announced mortgage holders could be due a refund on any tax paid, throwing the banking industry into absolute turmoil.
However, just a few days later the Supreme Court announced it would review the ruling with 31 of its judges. The outcome was that the responsibility would in fact go back to the borrower, a deep sigh of relief for the banks but a sense of injustice for mortgage holders.
But, in an unexpected twist and following an outcry from the public, prime minister, Pedro Sánchez, has intervened stating that the government will modify the law with immediate effect (Monday 12th November) transferring the liability back to the banks – a good result for borrowers but another major headaches for banks, who are only just recovering from the mortgage floor cause fiasco.Tags: Spanish Mortgage Tax