Taxation of refunds relating to floor clauses

The Official State Gazette (BOE) of January 21, 2017, published Royal Decree-Law 1/2017, of January 20, on urgent measures for the protection of consumers regarding mortgage floor clauses to enable the resolution of disputes between consumers and users in relation to mortgage loan contracts containing the so-called "floor clauses", which came into force on the same day as its publication.

In this article we will analyze exclusively the tax consequences of recovering such amounts with the application of this rule.

The Royal Decree-Law introduces a forty-fifth additional provision to the Personal Income Tax Law (Law 35/2006, of November 28) that regulates the tax effects arising from the refund, by banking institutions, of interest previously paid by taxpayers as a result of mortgage floor clauses, whether derived from an agreement between the parties, a court ruling, or an arbitration award. These effects are:

• The aforementioned Amounts returned should not be included in the taxable base of the tax.
• Nor should compensatory interest be included in the taxable base. related to them - until the entry into force of this Royal Decree-Law, said interest was classified as a capital gain, and had to be declared as such by the taxpayer.
• Assumptions of tax regularization:
  • If those interests had formed part of the deduction for investment in main residence or deductions from Autonomous Communities, because the right to the deduction will have been lost. Thus, it will be necessary to Include the amounts deducted in the personal income tax return for the year in which the dispute is agreed or resolved judicially or arbitrally., excluding late payment interest. Until the application of the Royal Decree-Law, the Personal Income Tax Law required the inclusion of late payment interest. An exception to this rule is made in the case where the amounts to be returned are used directly to reduce -amortize- the principal of the loan, and such deductions should not be adjusted..

• If the aforementioned amounts had been deductible expenses (real estate capital or economic activity), these will lose such consideration, and therefore must be presented supplementary declarations for the corresponding non-prescribed years - from 2012 onwards - without penalty, late payment interest or any surcharge, The deadline for filing these supplementary returns is from the date of the agreement, judgment, or award until the end of the next filing period for personal income tax returns. However, until the aforementioned Royal Decree-Law came into effect, these supplementary returns had to include late filing surcharges and, where applicable, late payment interest.

Therefore, in summary we can conclude that It is not appropriate to include in the personal income tax return the amounts received as a result of the return of interest paid or the recognized compensatory interest., due to the application of interest rate floor clauses.

However, as an exception to the above, Yes, it will be necessary to regularize your tax situation. for those taxpayers who either applied the deduction for acquisition of main residence -through the timely inclusion of said amounts in the tax return, without late payment interest- or they were applied as deductible expenses related to real estate capital or economic activity -through supplementary declarations of non-prescribed years, eliminating said expenses, without penalty, surcharges or interest-.

Finally, it should be noted that if the taxpayer had already regularized said amounts may be requested by the rectification of your self-assessments requesting the return of the late payment interest paid and, where appropriate, the modification of the compensatory interest declared as profit.

Andreu Fernández

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