New court ruling on mortgage tax suspended in Spain

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TAX RULING: Lenders will now be responsible for paying mortgage tax. CREDIT: Shutterstock

THE Supreme Court has suspended a decision to make banks responsible for mortgage tax as opposed to buyers, just 24 hours after it was made.

Contrary to an earlier decision made in February, the court this week ruled that lenders should pay the Impuesto sobre Actos Juridicos Documentados (AJD), a tax paid by the borrower at the time of closing, when a notary officially certifies the sale and the loan.

Judges had determined that the bank is the only party with a vested interest in having the loan documented by a notary, as it allow the lender to start foreclosure proceedings if the payments are not made.

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Because this privilege through public deed is given to the lender, judges deemed they should pay the fee, an announcement that led to heavy falls of the banks on the stock market.

It had been suggested that if the estimated eight million mortgage holders in Spain were to demand the tax back, it could represent around €24 billion.

But today it was announced that in the coming weeks, a panel of 31 magistrates will decide if it accepts that the bank or the client should pay the tax.

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