If you are selling a Spanish property, you will plusvalía municipal pay. The plusvalía is a municipal capital gains tax on the transfer of real estate. Unlike the national capital gains tax, the municipal capital gains tax is not based on actual realised capital gains.
Read more about the national capital gains tax.
Update 26/10/2021: Spain's Constitutional Court has declared the plusvalia municipal unconstitutional. The method of calculating the tax, which always assumes capital gains, is unconstitutional. The Spanish government has already indicated it will amend the tax. Learn more about the new plusvalia municipal rules here.
How is plusvalía calculated?
Since November 2021, as a taxpayer, you have a choice. In the first option, you pay capital gains tax based on the actual realised capital gains to obtain the tax base. Simply put, the second option uses a formula based on the land's cadastral capital gain. The municipalities determine the rates and coefficients to determine the increase in land price. For example, the maximum coefficient of the land price capital gain if sold after 8 years is 0.15.
Through this route, unlike in the past, you can no longer be taxed if you sell at a loss. However, there is an anti-abuse provision that provides for higher taxation if you sell back within the two years.
Exemptions
As discussed above, the municipal tax basically applies to any transfer of property. Thus, the plusvalía also apply to inheritances and gifts. However, there are a number of exemptions. One exemption important for practice applies if the property is transferred between spouses, such as during a divorce.
Read more about tax at the end of a co-ownership.
Who pays for the plusvalía?
In principle, the seller pays this tax. Parties have 30 days after the sale to pay the tax. In case a non-resident seller would fail to pay the tax, the municipality can recover the amount due from the buyer. It therefore happens that the buyer deducts the municipal tax from the sale price.
Decision
The plusvalía is difficult to calculate because the tax is based on criteria set by the municipality. If you want to know how much plusvalía you owe, you can go to the local town hall to have the tax calculated.
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Update: November 2022
