Plusvalia tax is a devolved tax levied by the town hall where your property is located.
It taxes the increase in value of the land (hence its Spanish namesake, plusvalia, or increase in value). Town halls calculate the applicable tax following a sliding scale.
Plusvalia tax challenged
Long story short, the Plusvalía tax was challenged in court and was suppressed by Spain’s Constitutional Court in October 2021, as reported at the time in Idealista.
Following a period of chaos, which lasted several weeks, the Plusvalía tax was reinstated a month later, as reported in Idealista.
November 2021 marked an inflection point, from which moment it was calculated differently, in the wake of the Constitutional Court's landmark ruling.
How was Plusvalia tax calculated before the reform of 2021?
The taxable base was attained by multiplying the value of the land at the time of the accrual of the tax multiplied by the number of years the asset had been in the estate of the owner, following regulated coefficients.
And finally, this amount was multiplied by a percentage that was set by each town hall (as they have devolved competencies on this tax), following a sliding scale.
How is Plusvalia calculated now?
A taxpayer can choose between two different methods of calculation; it’s slightly ironic, as no one is going to choose the most expensive one.
Objective method. It’s basically a new, revamped version of what we already had, with some new rules to calculate it.
You multiply the value of the land at the time of accrual of the tax times coefficients (town halls are empowered to rule on these coefficients).
On the result, you apply the tax rate set by each town hall. It cannot exceed 30%. To sum up, a very similar system to the one that was already in place.
Taxation by ‘real’ Plusvalia. Taxpayers now have the option to be taxed on the ‘real’ increase in value of the land (plusvalia).
Understood as the difference between the purchase and sale price, multiplied by the percentages set by each town hall and by the tax rate set by the new plusvalia tax law.
Accrual timespan | Coefficient |
|---|---|
Under 1 year | 0.14 |
1 year | 0.13 |
2 years | 0.15 |
3 years | 0.16 |
4 years | 0.17 |
5 years | 0.17 |
6 years | 0.16 |
7 years | 0.12 |
8 years | 0.10 |
9 years | 0.09 |
10 years | 0.08 |
11 years | 0.08 |
12 years | 0.08 |
13 years | 0.08 |
14 years | 0.10 |
15 years | 0.12 |
16 years | 0.16 |
17 years | 0.20 |
18 years | 0.26 |
19 years | 0.36 |
Equal to, or greater than, 20 years | 0.45 |
- All transactions under a year will now be taxable (before they went untaxed).
- Providing the taxpayer serves notice and manages to prove there has been no increase in value in the land, the transaction will go untaxed.
On a personal note, I need to point out that this is highly irregular. Because if a transaction goes untaxed, it follows that there is no need to file a tax return, as the transaction is not subject to taxation. But whatever.
When was the new Spanish Plusvalía tax enforceable?
Including, and as from, the 10th of November 2021 onwards.
Examples of the new tax
The Spanish government published multiple examples; we reproduce one of them:
REAL PLUSVALIA IS LARGER THAN THE OBJECTIVE PLUSVALIA
A dwelling acquired in 2017 for €310,000 is sold in 2021 for €350,000. That’s a profit of €40,000 over 5 years. At the time of the sale, the cadastral value (CV, going forward) is €100,000, of which €60,000 is the CV of the land and €40,000 is the CV of the building.
The increase in value of the land is the result of multiplying the plusvalia times the percentage of the CV of the land over the overall CV.
That is, 60% of €40,000, which is €24,000.
This 24k will be the taxable base of the ‘real’ plusvalia.
Result
Taxable base: land CV x coefficient = 60,000 x 0.17 = €10,200
The €10,200 will be the taxable base for the objective Plusvalia (which is inferior to the increase in value of the land of €24,000).
Quota = 10,200 x 30% = €3,060.
In the above example, we chose to be taxed by the objective Plusvalia in lieu of the ‘real’ plusvalia, as it is lower.
When is Plusvalia tax paid?
As a gentle reminder, you need to pay Plusvalia tax on:
- Selling property
- Inheriting property
- Gifting property
LNA-related services:
- Conveyancing in Spain – Buying
- Conveyancing in Spain – Selling
- Calculating seller's taxes and 3% tax rebate
- Gifting property or money
- Probate & Succession (Inheritance Tax)
At Larrain Nesbitt Abogados (LNA), we have over 23 years of experience specialising in property conveyance and taxation. We also assist clients with immigration & residency visas (digital nomad visa), and inheritance procedures (probate). You can contact us by e-mail at info@larrainnesbitt.com, by telephone on our UK line (+44) 0754 3838 218 or Spanish line (+34) 952 19 22 88, or by completing our contact form.
Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarising, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. Voluntas omnia vincit.
