Here at Spanish Solutions, we like to give our clients exact figures of what will be left once they sell their Spanish property.
Usually, it is straightforward enough, but as the exchange below between a property seller of ours and Rafa shows, sometimes things are not so easy. Rafa is a tax and accounting expert.
So what is the plusvalía or land value tax in Spain?
As the name suggests, Plus Valia in Spain is the tax applied to the increase of the value of the land. Plus means more, Valia means Value. This tax is due when a property is transferred, donated, sold or inherited. Interestingly, it does not apply to an increase in the value of the property itself, just the plot.
Clients in my opinion need to pay the correct amount of tax in Spain; not one euro too little and not one euro too much.
Here is the explanation to a client of ours from Rafa this week.
Dear Ian and Julian,
Thanks for this offer for selling my property.
I pretty much understand how Plus-Valia works in Spain. One thing I am unsure about is the fact that I am actually getting less than I paid for the property through the equity release.
I don’t understand why I would pay any plusvalia, because I haven’t gained anything.
Also, I understand that each town hall is different. How do I go about getting the correct information? Do I need to hire a lawyer to complete the deal?
I asked Rafa what approximately will James, our equity release seller pay in Plus Valia tax. Over to you Rafa…..
Reply from Rafa regarding Plus Valia.
On Tue, 27 Sept 2022 at 15:54, Rafael Hernández <email@example.com> wrote:
You asked for heaven…. It is impossible to give you a proper reply. Everything depends on each property in Spain. You can sell any property for 100.000 € but the value you bought it is different for each case. Plusvalía is basically a tax to charge you the increase of the value of that property (really the ground) through time. It is not the same tax for a property sold in 2 than in 20 years. Besides, each town hall in Spain is different.
New tax law.
Prior to November 2021 even if you made a capital loss, you had to pay plusvalía. This was unfair so the Supreme Court in Spain cancelled this system. Bad news, the Spanish government did not like this idea and one week after, the Government created a system in which you can choose the best option for you.
So based on what you are telling me, James will not have to pay plusvalía. Remember that you still have to submit the capital gain (even though you make a loss) in your tax return.
Although not simple or exact, I can give you just an example only to give you an idea.
Each property is a different world:
I bought a property in 15/02/2017 for 210.000 € and I sell it in 23/11/2021 for 250.000 €. The catastral value is 100.000 €, and the ground is 60%. The tax rate is 30%.
Purchase value: 210.000 €
Selling value: 250.000 €
Plusvalía is 40.000 €, so we have two options:
a) Objective method: 60.000 € x 0,17 = 10.200 € tax base
To be paid= 10.2000 x 30%= 3.060 €
b) Real method:
Purchase value = 250.000 € x 60% = 150.000 €
Selling value = 210.000 € x 60% = 126.000 €
Tax base = 150.000 € – 126.000 € = 24.000 €
To be paid = 24.000 x 0,30= 7.200 €.
We can choose the objective method because it is cheaper.
Un cordial saludo/Kind regards
Rafael HernándezManager & Tax AdviserSpanish Solutions
+34 966 76 17 41
C/ Flores, 3 Bajo C, La Zenia II, 03189 Orihuela Costa