If you are concerned with any kind of Property transaction involving urban, that is to say developed land in Spain you must always be aware of the liability to pay the Plusvalia Tax. It is charged either on the sale of a property, or if the property is the subject of an inheritance, if it is transferred in some other way, or if it is given away. This tax is a local tax charged by each municipality on the increase in value of Urban land in its own district land and is distinct from Capital Gains Tax.
It is important to realize that the tax is charged on land alone, not on the buildings that may stand on the land.
The rates of tax are set by each municipality and can vary widely from one district to another. The tax is based on the increase in the official, that is to say the “Catastral”, value of the land which a property occupies. This is the same value that is used to set your local property tax or “IBI” and can be found on the bill for your “IBI” issued by your local ayuntamiento each year and is shown as the “valor del suelo”.
The actual price at which a property changes hands, or the value attributed to it if is the subject of a gift or inheritance is irrelevant.
On a sale of a property it is the responsibility of the seller to pay the tax, but if the seller pails to pay it this responsibility may be passed to the buyer.
If the property is being inherited or is the subject of some other type of gift it is the beneficiary or recipient of the property who is liable to pay the tax.
Certain transactions are exempt from the Plusvalia Tax, the main ones which are likely to affect the general public are the transfer of property between spouses who are divorcing, or to children to comply with Court judgments, and “aportaciones” or transfers to companies in which spouses are the only shareholders which may be used for tax planning.
The amount of the tax that will be charged on a transaction will depend firstly on the Catastral value of the land which the property occupies, and secondly on the length of time since it last changed hands. If you are selling an individual house which stands on a large plot which you have owned for a considerable length of time the amount of the Plusvalia Tax could be many thousands of Euros. On the other hand, as the tax is charged on the value of land alone, the amount of Plusvalia Tax charged on a flat in a block which you have not owned for very long the tax may be quite modest.
For those of you who are considering rearranging your financial affairs to take advantage of tax planning schemes, the amount of Plusvalia tax that may be due is one of a number of elements, which include the Notary and other fees that may be payable, which you need to consider when balancing the costs and benefits of these schemes. Depending on the amount of Plusvalia, it may be cheaper to make a gift of the property rather than enter into more complex arrangements with higher Notary and other fees.
The time for paying the Plusvalia Tax is within 30 days of a sale or gift between living people, or 6 months of the date of death on an inheritance.
Your town hall can advise you of the amount of Plusvalia that may be payable on a transaction involving your property, or in many cases it is possible to obtain the calculation “on line”, but as I always write in concluding these articles, if in doubt take professional advice.