Plusvalia or the Spanish Capital Gains Tax
For already about a century in case of the urban real estate transfer the Spanish residents need to pay the plusvalia, or the capital gains tax. Many times paying exactly this property tax causes many confusions and inconveniences, so let’s define the main aspects of the plusvalía:
Who pays the plusvalia?
In case of inheritance or endowment the tax is payed by the recipient. In case of selling – the vendor. The exception is when the latter is not the Spanish citizen, then the plusvalia is payed by the buyer. The capital gains tax must be payed after the documents at the notary are successfully arranged.
How to calculate the plusvalia?
This is the hardest and the most arguable question. The capital gains tax is based on the profit realized on the sale of the real estate purchased at a cost that was lower than the sale amount. Due to the economic crisis the real estate prices have dropped, and the Spanish local authorities decided to calculate the plusvalia on the basis of the cadastral, not the market value of the property. This allows to increase the plusvalia, which is the main source of filling the municipal budgets in Spain. Unfortunately, the Supreme Court has not recognized this strategy as illegal. However, some lawyers state that plusvalia significantly reduces the profit of the property selling, especially if it lost its value and therefore, infringes the rights of the vendor written in the Consitution. Thus, Article 31 states that “everyone participates in financing public expenditures in accordance with their economic capabilities and through an equitable tax system based on the principles of equality that excludes confiscation. Taxation is possible only on the basis of the law. “
Is there anything you can do?
Unfortunately, the resistance strategy has not been introduced yet. If you decide to apply to the court on the recalculation of the tax, be prepared for a long and exhausting process.