THE ‘Plusvalia’ tax is one that every property owner and new buyer should become familiar with.
First of all, this tax is levied on any increase in the value of the land your property stands upon when it is sold to a new owner.
It is important to note that the tax is only applied to the value of the land, and not to the property on it.
Furthermore, it only affects lands that are classified as urban, not those defined as ‘rustic’. Each municipality is responsible for collecting this tax themselves, although some of them may delegate its collection to the Provincial Revenue Board of Malaga.
Either way, the tax must be paid within 30 days of the property being transferred to the new owner.
In the case of a property sale, the seller must pay the tax.
If the property is left as an inheritance, then the person receiving the property is responsible for paying the tax.
The Plusvalia tax is calculated by multiplying the tax base by the tax rate:
a) The tax base is the increase in value that the property has experienced during the time it has been owned by the seller. This increase is calculated by multiplying the cadastral value of the property at the time of its sale by the annual rate set by each municipal council (with the maximum limit established by law). The calculation is based on whole years, not on fractions of years.
b) The type of lien is the rate set by the municipal council, and there is a 30% limit established by law. There are, however, some variations depending on the years of ownership.
It is possible to estimate what you will owe on Plusvalia by visiting the relevant council’s web page, where you will find a handy tool to calculate it, but please be aware that this is only an estimate and not necessarily the exact final sum.
If the seller is not resident in Spain, the buyer’s lawyer will normally insist on withholding funds to pay the Plusvalia on the seller’s behalf to prevent the possibility of the buyer becoming liable for the Plusvalia in the event of non-payment.
What happens if the property sale price is lower than the purchase price? This situation often occurred during the recession when property prices fell.
However, the relevant fiscal laws decreed that there should be an assumption that there is always some increase in value. In the next article we will look at the legal changes that have taken place since then to make the system fairer although as we will see, in practice it remains problematic for non residents to get their money back.