Two taxpayers from Ibiza have won a legal battle against Spain's Tax Agency over €58,471 in income tax they say they overpaid following the expropriation of their property. The Balearic Islands High Court (TSJIB) ruled on 7 October 2026 that they are entitled to recover the money, plus statutory interest, after the administration rejected their request on the grounds that the deadline for claiming a refund had expired.

The dispute began in 2006 and centred on the tax treatment of an initial payment made during an urgent expropriation procedure. The final compensation for the property was substantially lower than the amount initially advanced, meaning the owners had declared a capital gain larger than the one ultimately established.

The court found that the Tax Agency could not disregard the guidance it had given the taxpayers years earlier about when they should seek a correction to their income-tax returns.

From an Initial Payment of Almost €1 Million to Final Compensation of €534,967.90

The case began in March 2006, when the owners of a property subject to an urgent expropriation procedure received an advance payment of €988,557. They declared the corresponding capital gain in their personal income tax returns.

However, the valuation of the property subsequently became the subject of a dispute.

The administration initially valued the property at €96,984. In September 2011, the Provincial Expropriation Commission set the compensation at €299,233.20, but the owners challenged that assessment in court.

In April 2017, the TSJIB established the final compensation, known as the justiprecio, at €534,967.90, plus interest. That amount was confirmed by a further court order in July of the same year.

Because the final compensation was substantially below the initial advance, the owners had to return the difference to the expropriating administration. However, they had already paid income tax on the larger initial amount.

The dispute that followed concerned how they could correct their tax returns and recover the excess tax paid.

Tax Agency Initially Told Them to Wait

One of the decisive elements in the case was the guidance the taxpayers received from the Tax Agency's Ibiza office in June 2011.

At that time, the administration rejected their request to correct their income-tax returns but indicated that they should carry out the adjustment when payment of the definitive expropriation compensation became enforceable.

The taxpayers followed that guidance and submitted a new request on 29 June 2022, seeking a refund of €29,235.50 each, totalling €58,471.

The Tax Agency rejected the request again, this time arguing that the statutory four-year period for claiming a refund of undue payments had expired.

The taxpayers challenged the decision, arguing that they had acted in accordance with the instructions previously provided by the administration and should not lose their right to a refund as a result.

Court Finds the Administration Breached Legitimate Expectations

The TSJIB's Administrative Litigation Chamber ruled in favour of the taxpayers.

According to the reported judgment, the court considered that the Tax Agency had created a legitimate expectation by clearly telling the owners in 2011 when they should request the correction.

The judges found that the administration could not subsequently rely on the expiry of the deadline to reject the claim without adequately addressing the earlier guidance it had provided.

The ruling refers to the legal principle of legitimate expectations, which protects individuals when they have reasonably relied on clear and consistent conduct by a public authority.

The court also criticised the administration's change of position, finding that it had failed to justify why its earlier instructions should no longer be followed.

€58,471 Plus Statutory Interest and Legal Costs

The court annulled the administrative decisions that had rejected the taxpayers' requests and recognised their right to correct their 2006 personal income-tax returns.

As a result, the Tax Agency must return €58,471, divided equally between the two taxpayers, together with the applicable statutory interest calculated from the date of the undue payment.

The administration was also ordered to pay the legal costs, subject to a maximum of €3,000.

The ruling does not mean that every taxpayer involved in an expropriation is automatically entitled to the same refund. The outcome depends on the facts of the individual case, the relevant tax treatment, the communications received from the administration and the applicable legal deadlines.

A Ruling That May Still Be Appealed

The judgment, dated 7 October 2026, represents a significant development in the two taxpayers' long-running dispute with the Tax Agency. However, the decision is not reported as final and may still be challenged through an appeal in cassation.

The case highlights the importance of clear administrative guidance when citizens must navigate complex tax procedures. It also demonstrates how earlier instructions from a public authority can become legally relevant when an individual later faces a dispute over statutory deadlines.

For the two property owners, the ruling recognises their right to recover €58,471 in tax, plus interest, after nearly two decades of disputes linked to the original expropriation.