It is possible that you do know about this tax if you have sold your property before. If not, this will look like a second capital gains tax. We will show you in this article how it works and explain the possible future of this tax.
Which is subject on this tax?
The true name of this tax is Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana (IIVTNU) or in English literally, Tax on the Increase in the Value of Urban Land, better known for the Spanish as “Plusvalía”.
This tax is collected by the town halls and the controversy has been after it a lot years. Some taxpayers think this is a second capital gains tax. In fact, on November 2021 the Constitutional Court made illegal the calculation method. It took one week for the Government to approve a new brand legal method. Recently, one of the parties on the opposition appealed to the Constitutional Court but they said this new method is 100% legal. Supreme court doesn’t think the same, so this is not the end of the debate.
How is the new method?
Let’s see this with an example. My friend Nicola bought a property in 20/03/2014 for 150.000 € and now she sold it by 180.000 € in 01/12/2022. The catastral value is 100.000 € which 35% is to the ground.
The plusvalía is 30.000 €. We see the two options we have:
The value of the ground is 35.000 € x 0,15 = 5.250 €
Tax base is 5.250 € x 30% of the tax rate = 1.575 € to be paid.
The figure 0,15 is ratio which use from a table. Depending on the years, the figures are higher or lower. There is national table but each town hall can vary this.
Transmission value: 180.000 € x 35% = 63.000 €
Purchase value: 150.000 € x 35 % = 52.500 €
Plusvalía is 10.500 € x 30% of the tax rate = 3.150 € to be paid
You can choose the most profitable option for you. The objective method in our example. Don’t forget that if you chose the real method, you have to provide the deeds which prove the figures.
Last but not least, bear in mind this tax is deductible on your capital gain tax.
Our professionals in Spanish Solutions can help you to get the result of this tax.