When you sell a property in Spain, you are liable to pay a tax called Plusvalia. This article discusses what the Plusvalia is, how it’s calculated on the property price, and who needs to pay it.
What is the Plusvalia tax?
The Plusvalia Tax on the Increase in Value of Urban Land (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana, IIVTNU) is a property tax levied by the Spanish government on the increase in value of urban land.
The goal of this tax is to tax the increase in the value of the land, whether there is a property on it or not. Some of this increase in value is due to improvements to the area that the local government has made.
Local property tax
The Plusvalia tax is similar to the capital gains tax; only it is paid to the municipality; in other words, the Plusvalia is the municipal capital gains tax. It is set by the local tax office where the property is located and is based on the value of the land value and the number of years that the seller has owned it.
When do you need to pay Plusvalia tax?
When you sell a property, the municipality has the right to collect the Plusvalia tax from you. The tax is payable when the transfer of ownership of the property is registered with the Land Registry (Registro de la Propiedad).
This can happen when:
- Selling the property
- Donating the property
- Inheriting the property
Whether the property transfer is business-related or not is irrelevant, the municipality will still charge the Plusvalia tax.
How is the municipal capital gains tax paid?
The tax obligation happens when the taxable event is carried out, and the tax needs to be paid at one time.
- When inheriting, the tax payment is due in 6 months.
- When selling the property, the tax needs to be paid in 30 days.
You can pay the tax at the local town hall, local tax office, or online.
How is Plusvalia tax calculated?
The amount of Plusvalía tax you have to pay depends on three factors, including:
- The municipality where the property is located
- The number of years you have owned the property
- The base (which is the value increase of the property)
You don’t have to pay the tax when you lose money on the sale of your property.
Base property price
The base value is determined by subtracting the purchase price from the sale price. The taxpayer has two options for the base of the calculation.
- Real capital gain: the difference between the purchase price of the land and the selling price.
- Nominal capital gain: a base that reflects the real property market. Which means the real capital gain.
If the real capital gain is higher than the nominal capital gain, the Plusvalía tax can be decreased.
Base (real or nominal capital gain) * percentage = plusvalia tax
The coefficient depends on the number of years and can be found in the following table.
The table above is an indication and set as a maximum by the government. Depending on the municipality or time you check the table, the coefficient could be lower or higher.
What happens when land and construction are transferred?
When construction is on the land, the construction will be subtracted from the sales price to calculate the capital gain of the land.
Who needs to pay Plusvalia?
Depending on the situation, the person that needs to pay the Plusvalia tax is:
- The seller: The property seller is responsible for paying the tax; however, the seller can negotiate with the new property owners to pay the tax. In some cases, where the property is sold as part of a company, the company is liable for payment.
- The buyer: In case the seller is a non-resident in Spain the buyer will have to pay the Plusvalia tax. This is because the seller might leave the country and will never come back to pay the tax.
- The donee: When it comes to giving, the donee, or recipient of the donation, is responsible for paying capital gains.
- The beneficiary: In the case of inheritances, it will be the beneficiaries who must pay this municipal tax.
A word from SpainDesk
We hope you enjoyed this article. We advise you to seek legal counsel or tax advice for more information or specific cases.
If you would like to know more about Spanish property law or if you need assistance with your legal or tax case in Spain, contact us. We are happy to help.