Everything you Need to Know About Plusvalia Tax

  • 2 years ago
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If you’ve been looking at buying or selling a property in Spain recently, then we’re sure you would’ve seen that the Plusvalia tax has now been scrapped, or, in official terms, ‘unconstitutional’. 

This change was announced on 26th October, with follow up details being released over the next days that followed.  

But what does this mean for future of buyers and sellers, and what are some of the advantages you can expect to see from the recent ruling? 

To give you further insight into the tax and to highlight some of the things you should be aware of now the tax has been scrapped, we’ve put together a useful guide that both sellers and buyers can refer to during their property investment journey. 

What is the Plusvalia Tax? 

Before we begin, lets cover what exactly the Plusvalia Tax is. 

The tax, before being scrapped, was a municipal tax that was charged by the town hall on all properties that were sold. 

The objective of the tax was to help increase the value of the land on which the property was located, and the amount of tax due was down to how long the seller had owned the property. Essentially, the longer the period is, the higher the tax will be. 

How was the Plusvalia Tax calculated? 

The Plusvalia Tax was calculated with the following four elements: 

  1. The official value of the land 
  1. The number of years the property was owned by the taxpayer 
  1. Coefficient approved by town hall to assess the increase 
  1. The current tax rate 

To confirm the land value rate, sellers could go to the local town hall, refer to their IBI receipt or ask a tax specialist.  

The amount payable would appear straight away at the moment of the transfer of the property, and the seller would have 30 days after selling the property to make the payment to the town hall.  

Any delays in this would’ve resulted in legal implications, so it was a very important step for sellers to be aware of! 

While nine times out of ten, the Plusvalia Tax had to be paid for by the seller of the property, there were also some instances where the seller and the buyer could negotiate to determine who pays the tax. 

Is Plusvalia the same as capital gains tax? 

Unlike the Plusvalia Tax, Capital Gains Tax is based on the actual profit obtained from the house sale, and as it stands currently, non-residents must pay 19% on the profit gained from the sale of the property. 

In cases where no profit is being made, as a non-resident, the buyer of the property is required to retain 3% of the sale price, on account of tax liability. 

For those that are losing out on profit on a sale, or it is less than the 3%, they will be entitled to a full or partial tax rebate.  

What are the benefits of the tax being abolished? 

The immediate benefit for sellers is obvious – if you are selling a property in Spain, you will not have to pay the Plusvalia Tax on your property sale.  

While you could argue the tax being scrapped is better for sellers, it can also be a great thing for buyers. 

For example, sellers may be more willing to drop the price of the property since they are not paying the tax.  

Plusvalia Tax refund 

Naturally, many people will be intrigued to find out whether or not they can claim for a refund now the Plusvalia Tax has been scrapped. 

Luckily, this tax is able to be fully refunded. 

However, we advise that you seek some form of legal advice when looking to pursue a Plusvalia Tax refund request, just to be sure everything is being dealt with smoothly and appropriately.  

It’s important to remember that with any change in legislation, this may not be permanent and could be subject to further updates in the future, so we recommend that you keep your eyes peeled! Its important to be aware of government legislation, especially when looking to get started with overseas property investment.  

Do you need help with buying a property? 

If you’re interested in purchasing a property in Spain, such as a modern and luxurious villa or apartment in the beautiful region of Murcia, then please get in touch with the team at Andrew Brown today! 

We can listen to your specific needs to help you find the perfect property of your dreams, while helping to navigate the various buying processes associated with purchasing a property in Spain. 

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