The "plusvalía" tax in Spain, formally known as the "Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana" (IIVTNU), is a municipal tax that applies to the increase in value of urban land when it is sold or transferred. The tax does not apply to the buildings, structures, or physical improvements on the land, but rather to the increase in value of the land itself over the time it was owned.
Here are some key aspects of the plusvalía tax:
1. Who Pays the Tax:
Typically, the seller of the property is responsible for paying this tax, although it is a negotiable item in the property transaction and sometimes the buyer might agree to take on this responsibility.
2. Calculation:
The tax is calculated based on the increase in the "cadastral" value of the land from the time it was acquired to the time it is sold. The actual calculation involves two main factors:
The cadastral value of the land (which is an administrative value assigned by the local government and usually different from the market value).
A coefficient that depends on the number of years the land has been owned, set by the local municipality within the limits established by law.
3. Municipal Dependence:
Since the tax is municipal, the rates and specific rules can vary from one locality to another within Spain. Each town or city council sets its own rates and coefficients within the framework of the national legislation.
4. Exemptions and Reductions:
There are situations where the tax may be reduced or exemptions applied. These can depend on the specific circumstances of the sale or transfer, the nature of the property, or the profile of the seller or buyer (e.g., certain tax benefits might be available for large families, the elderly, or when the sale is due to a foreclosure).
5. Controversy and Legal Changes:
The plusvalía tax has been subject to controversy and legal challenges, particularly concerning cases where the actual market value of the land has decreased but the cadastral value has not. In response, the Spanish Constitutional Court has made rulings that have influenced the application of the tax, leading to legislative adjustments to ensure that the tax is not charged when there is no actual increase in value.
6. Importance in Property Transactions:
Understanding the implications of the plusvalía tax is crucial for anyone involved in property transactions in urban areas of Spain. It affects the net amount a seller receives and can influence the negotiations during the sale or inheritance of property.
Overall, the plusvalía tax is an important consideration for property owners and buyers in urban areas of Spain, as it can significantly affect the financial aspects of property transactions.
Please do not hesitate to contact Lopez & Moreno Associates if you need advice and assistance on the purchase of your Spanish property.