Author: Maura Hillen, Hillen Real Estate Advice, Management and Mediation.
Plusvalía is a type of capital gains tax that can become payable to your local town hall when you sell your property in Spain and it can amount to a bill for thousands of euros. However, you are not always obligated to pay this tax as this article explains.
What is plusvalía tax?
Plusvalía is the name given to the tax on the increase in the value of urban land (incremento del Valor de los Terrenos de Naturaleza Urbana (IIVTNU)). It is intended to tax the increase in value of the urban land on which the property stands due to improvements to the general neighbourhood rather than specific improvements to the property itself.
In order to qualify as urban land, the land must be classified as such on an approved town plan OR be urban in all but name having all the services required by planning law (street access, electricity supply, mains water, water evacuation), as confirmed in a formal consultation with the tax office in 2014. https://www.gtt.es/boletinjuridico/impuesto-sobre-el-incremento-del-valor-de-los-terrenos-de-naturaleza-urbana-consulta-vinculante-de-la-subdireccion-general-de-tributos-locales-v1589-14-de-20-de-junio-de-2014/
Is plusvalía applicable when I sell a house on rustic land?
According to the definition of plusvalía tax, the answer is NO unless your town hall can reasonably argue that the area in which your property is located is urban in all but name.
Am I liable to pay this tax if my land is classified as rustic but my house is classified as urban on the Catastral?
No. Not unless the town hall can reasonable argue that your property is on urban land in all but name, as explained above.
Is plusvalía applicable when I sell a house at a loss?
No. There is no obligation to pay this tax when it can be established that the property has been sold at a loss. As confirmed in a sentence of the Constitutional Court on 11th May 2017 ( Case no. 4864/2016) https://boe.es/buscar/doc.php?id=BOE-A-2017-6855
What properties are exempt from paying this tax?
Properties located on rustic (non urban) land as discussed above.
Those located in the old quarters (casco histórico)
Those designated as being of historic or artistic interest.
Who benefits from this tax?
Your town hall benefits from the payment of plusvalía. They may manage this process in-house or delegate responsibility to a third party such as the Diputación. Either way, the tax must be paid within 30 days of the property being transferred to the new owner.
Who pays the plusvalía?
According to the Law regulating local taxes (Ley Reguladora de las Haciendas Locales), the law that regulations plusvalía, the person obliged to pay on the sale of an urban finca (not a rustic one) is:
The person acquiring the property through inheritance or donation.
The seller, if the property is sold.
The buyer, if the seller is non-resident.
The parties can make agreements about who should pay the tax but in the case of non-payment the Administration will claim against those designated as responsible according to the law.
Who should handle this tax on your behalf?
A competent lawyer or conveyancing agent can handle this matter as part of the sales process. In the case of sales of properties exempt from this tax, your representative should be expected to properly justify this exemption.
Always ask for proof of payment of this tax, bearing in mind that the tax is payable 30 days after title to the property is transferred.
It is important to note that it is up to you, via your representative, to make the case that you are not liable to pay this tax. Plusvalía is a source of revenue for town halls after all and it can take years, if ever, to obtain a refund if the tax has been paid in error.
Any Questions or Concerns?
Please get in touch.