The compensation councils in Spain (“junta de compensación”)

The definition of compensation councils in Spain is set out in the Spanish Royal Decree 3288/1978.

The urban planning must be executed in essence by the Administration of the State, the local entities, the special urban entities and in particular all individuals.

The compensation councils are created to develop a certain area of the town in Spain. They have their own administrative board and have legal personality.

The interesting parties create these compensation councils to create a system so that all owners of plots that fall under a certain urban plan, can exercise the public functions in favour of the general interest of all the owners.

The Spanish fiscal consequences of the original contribution of the plots to the compensation councils depend on the fact whether the compensation councils act as trustee or not:

• The compensation councils act as trustee, then there is no conveyance of the plots of the members to the council neither afterwards from the council to its members. Thus, no fiscal consequences must be borne.
• The compensation councils do not act as trustee, then there is a conveyance of the plots of the members to the council and thus fiscal consequences must be borne. These fiscal consequences will be dealt with in our next blog.

The setting up of the compensation councils in Spain, contribution of the plots by the owners and the subsequent allotment is one of the most complex urban mechanisms in the Spanish legal system.

Do not hesitate to contact our team lawyers and accountants in Spain if you wish more information on the compensation councils. We are at your disposal for any Spanish urban, legal, fiscal, accountancy and corporate enquiries.

María Teresa Arcos, laywer in Spain.

Wim Lamers, accountant in Spain