A special reference should be made to a type of local or municipal capital gains tax on property in Spain – known as the Plusvalía.
What is the plusvalia tax in Spain?
The plusvalía is a local (municipal) tax charged by the town hall on properties when they are sold. It is calculated on the rateable value of property and the number of years that have passed since the property was last changed hands. The objective is to tax the increase in the value of the land on which the property stands, some of which is due to improvements to the area carried out by the local government and the community at large.
The base for this tax is the valor catastral (an administrative value that is usually lower than the market value, sometimes considerably so) of the property. The amount due in tax will depend on how long the seller has owned the property: the longer the period, the higher the amount of tax.
Who pays the plusvalia tax in Spain?
In theory the vendor, though both parties are free to negotiate who pays it. During the boom, when vendors had all the negotiating power, it was reasonably common for buyers to agree to pay it, especially in areas like Andalucia. However, since boom turned to bust in 2008, any vendor lucky enough to find a buyer is almost certainly going to have to pay the plusvalía municipal tax, as buyers are now in the stronger negotiating position.
How do you pay the plusvalia tax in Spain?
You have 30 days from the date of sale to pay the plusvalia to the town hall.
If you (the vendor), are not resident in Spain (whatever your nationality), the buyer may insist on withholding funds to pay the plusvalía on your behalf, as the new owner would become liable for the plusvalía in the event of non-payment (i.e. if a non- resident does a runner without paying).