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Plusvalia and Capital Gains Tax explained

For NON Residents in Spain

Plusvalia & Capital Gains Tax for Non Residents in Spain

When you sell a property in Spain, you have to pay two different taxes: Plusvalia (in Spanish “Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana” or IIVTNU) and Capital Gains Tax (in Spanish “Impuesto sobre la Ganancia Patrimonial”).

PLUSVALIA. This is a municipal tax payable to the local council (“Ayuntamiento“), based on the increase of the official value of the land between the purchase and the sale dates.

The increase in the value of the property is calculated by taking the catastral value of the property at the time of selling (this is a value stated on the Rates bill issued by the local Town Hall). You then multiply this by the annual rate that has been set by the local municipal council, taking into account the number of years you have had the property. Therefore, the factor that most affects the value of the Plusvalia is the number of years that you have owned the property.

After several Spanish Court Decisions ruled that the way this tax is calculated in not legal, the Spanish Government finally passed a decree on the 8th of November 2021, making substantial changes in the way this tax is calculated. The two most important changes are:

  1. If the sale price declared in the title deed is lower than the purchase price declared in the purchase deed, there will be no Plusvalia to pay at all.
  2. In case the profit obtained is small, but the Plusvalia tax is high, the taxpayer can choose an alternative way to calculate the  tax, which will take into account the purchase and sale price.

Capital Gains Tax (CGT). This tax is collected by the National Tax Office (Agencia Tributaria). Unlike the Plusvalia, this tax is fairer because it is based exclusively on the actual profit obtained. Currently, Non Residents in Spain (but residents in EU countries) have to pay 19% on the profit. However, it is important to know that even if you are making no profit at all, due to you being a Non Resident, the buyer of your property will be obliged to retain 3% of the sale price on account of your possible tax liability. Of course, if you have no tax liability at all because you are losing money with the sale, or your liability is less than the 3% retained, you will be entitled to a total or partial tax rebate, depending on the case. Please note that: 1) The Tax Office will take between 6 to 10 months to pay the refund, and 2) Before paying the refund, the Tax Office will check that you have been paying your Non Resident Income Tax

 

2 Responses

    1. Dear Bernice,
      Thanks for your question.
      If you have made a loss on the sale of your property, and also if you have made a profit, you always have to file a Capital Gains Tax Declaration using form 210. You will need to provide copies of the purchase and sale deed and receipts of the expenses of both the purchase and the sale, and a receipt of the payment of the 3% which you should obtain form the buyer. Of course we can take care of all this for you. Please get in touch by email to mb@bravolegal.es, and I will give you more information. Best regards

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