The Spanish Plusvalía is a local tax that is paid when a transaction is made on the property. That is, when a sale, a donation, an inheritance, etc. is made.
This tax is declared, calculated and paid to the local Town Hall where the property is located.
Together with the Council Tax, has been during decades one of the main financing sources from local authorities, and generated an important amount of local incomes, as it was subjected to each one of the transactions on real estate made in area.
Therefore, it is a tax that only has to be paid when there is a dispositive transaction of the property.
The way in which the Plusvalia tax is paid varies from each transaction. So, let us detailing some of the cases:
- In cases of purchases and sales in resale properties, it is the vendor who is liable to pay this tax.
- In case of new buildings, it is the builder the one who has to pay for the Plusvalia tax.
- In case of donations, where the “donator” gives the property to the “receiver” , it is this last one who has to pay for the tax.
- In case the property is divided as per divorce, separation, etc, the Plusvalia tax must be paid by both parties equally.
This tax is calculated through a complicated system that is difficult for local administrations to obtain. However, for its calculation, the cadastral value of the property, the years in which the owner has enjoyed the property, etc. are taken into account.
In principle, and basically, this tax comes to record the properties for the increase in value of the land on which they are built.
For many years, the Spanish local administration has been carrying out settlements of this tax even in situations in which it had been shown that there was no increase in the value of the land, and that the owners were selling at a loss. This has given rise to a major dispute between the administration and consumers, who have seen that, even selling their properties at a loss, they have been forced to pay this type of tax.
However, recently, a ruling by the Spanish Supreme Court 2021 has established that, in the event that the sellers, or those who dispose of their properties, do so at a loss, that is, the sale price is lower than the acquisition, they do not have to pay this tax.
Now, after December of the year 2021, the Sentence of the Spanish Supreme Court this has meant a great advance for the position of citizens since, in the case of loss, or not having a profit, they are not forced to pay this tax.
This Sentence has generated a big impact on the local Town Halls in Spain, due to the financial dependence of these institutions over this local tax. It has generated, in fact, an important way to consider local finance in Spain.
Depending on the time in which the property has been owned by the owner, the Plusvalia tax can be reasonable high. So, in order to avoid unexpected surprises at the end of the process, we highly recommend you instruct your lawyer to make a previous calculation on this tax at the very early stage of the transaction.
The way to calculate the Plusvalia is quite easy, and it can be obtained in a rapid way either from the Town Hall where the property is located, or by special official sites.
RETENTION OF PLUSVALIA TAX IN CASE OF VENDORS’ NON FISCAL RESIDENT
A special characteristic of the management of the payment of this tax is carried out when the person obliged to pay it is a non-resident in Spain. The tax payment declaration is made once the sale is completed. That is, after the transaction is complete.
With which, in the case of purchase and sale transactions of properties in Spain, this means that the seller, when considered non-resident in Spain, will not remain in Spain contactable to make the declaration and pay the tax. correspondent.
Therefore, there is a risk of non-payment for the buyer, given that, as the seller is considered a non-resident, there are no guarantees that, once the transaction has been carried out, and the full payment of the price of the sale to the seller, the seller consequently makes the declaration and payment of the municipal Plusvalia.
For this reason, it is widely agreed in the sales management transaction in Spain that the buyer can withhold from the price to be paid by the seller, the calculated amount that results from the payment of the municipal Plusvalia tax. In this way, the buyer guarantees that once the sale operation has been carried out, he can have sufficient funds to pay this tax, and that no debt is generated on the property. This is a widely used mechanism in the property sales system in Spain.