WHAT IS PLUSVALÍA?
« Plusvalía municipal » ou « Impuesto sobre el Incremento de Valor de Terrenos de Naturaleza Urbana » (spanish acronym, IIVTNUl), is a tax that is paid when selling a property and it's calculated on the value increase that the property's land has had over time that has belonged to its owner.
In other words, it is a tax that is paid for the profit that, in theory, the seller of a property obtains for the difference in value of the current land (registered in the new deed of sale) and the value of that same land in the owner's original
deed.
This municipal tax has been questioned on many occasions. The reason is that this increase in value is already contemplated, in one way or another, in the personal income tax (national) and in the ITP (regional). Even so, the Constitutional Court has ended up declaring the Capital Gains tax as constitutional, provided that there has been a real increase in the value of the land.
WHEN PLUSVALIA IS NOT NEEDED TO BE PAID
There are a series of circumstances in which the Capital Gain is not paid:
- Wether there has not been a real increase in the value of the land. The easiest way to verify it would be by comparing the cadastral value of the land that appears on the IBI receipt for the first year of ownership with that of the last year, at which time you want to sell.
- Wether it is a rustic land, and not an urban one. This information can also be checked at the IBI.
- Wether the property has been in the hands of the seller for less than a year.
- Wether it is transmitted to a spouse or children, in situations of divorce, separation or marriage annulment.
- Resulting from the liquidation for widowhood within a marriage under a community property regime.
- Wether it is transmitted after the dissolution of a community of property. If the real estate is not divisible, and it is agreed that one of the members receives financial compensation in exchange for assigning the part of it, this is not considered a purchase.
- That a land has been awarded through a reparcelling.
- That the land has been transferred through the creation of a "Junta de Compensación".
WHO SHOULD PAY THE PLUSVALIA
The seller, according to the law, must be the one who faces this tax. There is the possibility of agreeing that it is the buyer who faces this payment, although, in case of non-payment, it will be the seller that the City Council claims this
amount.
On this basis, we must pay attention to some special cases:
- If the seller is not a national resident (does not have tax residence in Spain) the law will require payment from the buyer, in case of non-payment. In this case, it is recommended to agree that this amount be deposited with the notary, at the time of signing.
- If the seller is a promoter, and a clause is included in the sales contract that obliges the buyer to face this tax, the elimination of this clause may be required, since it is legally abusive.
- In the case of a transfer by inheritance or by donation, the obligor in these cases is the one who receives the property.
WHEN AND HOW IS THE PLUSVALIA CALCULATED
The Tax on the Increase in the Value of Urban Land (IIVTNU) must be paid within 30 business days (not including holidays) in the case of purchase or donation, and from 6 months to a year in the case of inheritance.
It is the taxpayer himself who will have to take care of requesting the form at the town hall, calculating the amount and entering it. In any case, you can consult any questions at the town hall, as well as on the town hall's own website where you can use a simulator that calculates the exact amount.
The calculation can be somewhat complex to perform, so it is recommended to go to the town hall for advice. This figure will be calculated from the cadastral value of the land (not the construction) that is specified in the deeds or in the Real Estate Tax, and a percentage will be applied depending on the years it has been in property and a type of lien, set by each city council. In some cases, a series of interesting bonuses and deductions could be deducted from this amount, especially in inheritance cases.
It is important to know that the payment of this tax is also included in the personal income tax, when declaring the profit from the sale of the property. In this way, if the seller pays it, he deducts it from the sale price; and if the buyer pays it, he adds it to the purchase price. In this way double taxation is avoided.
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