15/11/2021
Spain's Council of Ministers approved a new Royal Decree on Monday, November 8 which will change the way that Plusvalía tax is paid to each of the country's municipal governments.
It follows the Constitutional Court's decision on October 26, which declared that the previous way of calculating the tax was unconstitutional.
This was because judges found that many property owners were still being charged the tax even though the value of the land their homes were built on had not increased. This was especially so during the pandemic when property values fell, however, the town halls still charged on the assumption that the land value had increased.
Over the years, Spain’s legal system had been inundated with formal complaints raised by property vendors who claimed they had been unfairly charged by the local councils.
The Courts, therefore, judged that the tax was unfairly biased in favour of the local councils who always saw an increase in capital gain due to the land value increasing, even if the property value didn’t.
The local council’s argument is that because of local improvements in public services and facilities, the municipality has added value to the local area and helped to increase the land value, hence, they believe this warrants them taking a cut of any capital gains.
As revenue from the Plusvalía tax is used to bolster the local municipalities coffers, Monday’s decision could mean that local councils are now set to lose many millions of Euros in funding as a result.
What is Plusvalía tax?
Plusvalía or 'Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana (IIVTNU)' is a land value tax that is collected at a municipal level and charged by the town hall.
The tax is levied when the value of the land that an urban property is built on, increases in value from when it is purchased to when it is sold or donated and is usually paid within 30 days of the property transfer.
The person who sells or donates the property is the one who has to pay the tax, with the amount that is paid varying between the different municipalities.
If the property is inherited, it is the person who has received it who will have to pay the Plusvalía tax.
Unfortunately, the latest ruling is not retroactive, so those who paid the tax previously will not be able to claim it back.
How will changes to the Plusvalía tax affect property sellers and taxpayers?
With the new changes coming into force from Monday, November 8, the way in which the tax is levied will change.
In fact, the Ministry of Finance has said that nobody who makes a loss when selling a property will have to pay the capital gains tax.
Spain’s tax agency, the Hacienda will now give the taxpayer two options in how they can have the tax applied, with the bonus being that they will be able to choose the one that is most favourable to them.
The first option will be to calculate the tax based on the “valor catastral”. This is the rateable value of a property that is used to calculate property taxes. This is calculated by multiplying the cadastral value by the number of years that have elapsed since the operation.
The alternative option will be to calculate the tax based on the difference between the original purchase value of the land and that at the time of sale.
The Ministry believes that the new way of calculating Plusvalía will be fairer for the taxpayer while continuing to allow local municipal councils to generate revenue from it.
Local town halls will have six months from the ruling in which to apply the changes.
Source
https://spanishnewstoday.com/new_capital_gains_tax_approved_in_spain_1677805-a.html
https://www.thelocal.es/20211108/plusvalia-the-changes-to-spains-property-tax-that-home-owners-should-know-about/
https://www.diariojaen.es/espana/el-gobierno-aprobara-hoy-un-decreto-para-adecuar-el-impuesto-de-plusvalia-a-la-sentencia-del-constitucional-KD8104729
https://www.antena3.com/noticias/economia/gobierno-aprueba-este-lunes-nuevo-impuesto-plusvalia-municipal-2-vias-calculo_202111086188df541094410001902ada.html
