Important changes to the Spain’s plusvalía taxes
Home owners in Spain who intend to sell or pass on a property should be aware of the important changes to the country’s plusvalía taxes, which can amount to thousands of euros.
Plusvalía is a land value tax charged by town halls on urban properties which are sold, donated or inherited. In general terms, it sees municipalities tax the increase in value of urban land on which the property is located from when it’s bought until it’s sold. The person who sells or donates the property usually has to pay this tax, which varies between regions and municipalities.
The argument used by town halls to charge plusvalía is that through public improvements carried out in a given area, the municipality has contributed to increasing the value of the property and its location, thus deserving a cut.
In October, Spain’s Constitutional Court ruled that the country’s plusvalía property tax was unconstitutional, in effect annulling the calculation used to charge this tax. The main reason for this is that judges found that even if there hadn’t been an actual land value increase, sellers, donors or heirs were being automatically charged this tax by town halls.
Spain’s Council of Ministers approved a new version of this municipal capital gains tax in November
The law will see Spain’s Hacienda tax agency give two options to calculate the tax on municipal capital gains and the taxpayer will be able to choose the one that is most favourable to them.
They’ll be able to choose to calculate the amount by applying the new calculations on the “valor catastral” (Spain’s rateable value of a property used to calculate property taxes), which you get by multiplying this cadastral value by the number of years that have elapsed since the operation Or, alternatively, they can estimate the value increase by calculating the difference between the purchase price and the sale price.
The new rule has impacted the finance of Town Halls, In Madrid for example it represents €500 million of the yearly amount added to public coffers, around a tenth of the total but in other municipalities such as Torrevieja in Alicante, Casares in Málaga or Villaviciosa de Odón outside of Madrid, authorities would lose between 30 and 24 percent of their tax income.
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Blog : Important changes to the Spain’s plusvalía taxes
