When selling a property in Spain, one of the taxes that the seller has to pay locally is the “Plusvalía”. It is a tax payable to the town council in the area where the property is located. It is an obligation of the seller. Its legal name is: Tax on the Increase of the Value of the Lands of Urban Nature.

The procedure of the application of this tax is the following:

Once the sale of the property has been formalized before a Notary, you will receive a letter from the City Council informing about the obligation of the payment of this tax.

It is the Notary who notifies the City Council about the sale of the property and that is why the seller is notified by the City´s Collection Office with a letter of payment that contains the amount to be paid and the period of payment. 

The “Plusvalía” does not have to be paid if the property is bought and sold within one year or less.

This tax is calculated based on the cadastral value of the land, the City Council applies a percentage to the increase in the value obtained by the property in the years since it was purchased until the sale date with a maximum of 20 years.

The terms of this payment is 30 working days from the date of Deed of sale in Notary. If for any reason it is presented outside of these terms it is necessary to abide by the following established surcharges as long as the City Council has not proceeded to issue a request for lack of payment: 

Late payment with less than 3 months: surcharge of 3,75% of the original amount.

If the late payment is made with a delay of more than 3 months and less than 6 months there is a surcharge of 7.5% of the value of the original tax.

If the late payment is made with a delay of more than 6 months and less than 12 months the surcharge is 11.25% 

If the late payment is made with a delay of more than 12 months the surcharge will be 15%

Unfortunately if there is a request from the Tax Office these surcharges may be higher.

The “Plusvalía” is an obligation of the seller but in case the Seller is a non-resident person this obligation falls on the buyer so that the buyer must retain the amount of the “Plusvalía” when pay the price of the property and it has to be entered in the correspondent tax model in the name of the seller.

NOTICE: Following the Judgment of the Constitutional Court of February 16, 2017, if in the sale of the property there are no assets, but losses, an appeal for reconsideration may be filed appealing the nullity of said tax. 

According to the Judgment of the Constitutional Court, applying the Principle of economic capacity and prohibition of confiscation: nullity of the legal precepts that regulate the tax on the increase of the value of land of urban nature, insofar as they subject to taxation situations of non-existence of increases in value (SSTC 26/2017 and 37/2017).

Issue of unconstitutionality number 4864-2016 declaring unconstitutional and null and void articles 107.1 107.2 a and 110.4 of the revised text of the Law regulating local properties approved by RD 2/2004 of March 5, void to the extent that they submit to taxation situations of inexistence of value increases.

Likewise, some City Councils admit the presentation of a written document claiming the annulment of the tax when this always occurs within 30 days from the signature of the sale in the Notary. This document requires a copy of the original deeds of purchase of the property (from the seller) and a copy of the deeds of sale along with a copy of the DNI or NIE of the seller and this so that the Local Authority can verify that loss of assets.

In these cases it is not necessary to pay the capital gain to have to resort to it later.

The brief is presented and its resolution is awaited.