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Spanish Courts Annul Plus Valia Tax

Spanish Courts Annul Plus Valia Tax

UPDATED 25/11/2021

The Spanish Council of Ministers has now unveiled a new law outlining an adaption in how municipal taxes on capital gains are calculated, in the wake of the recent ruling declaring existing Plus Valia calculations null and void.

Property owners are now able to choose a calculation that best suits them from two different options.

Option 1 – Updated Catastral Value

Payment based on the catastral value of the property at the time when it is transferred to a new owner, based on new, updated coefficients currently being calculated by town halls across Spain, within general guidelines set by the Spanish Government.

Option 2 – Purchase v Sale Value

Alternatively, owners can choose to calculate the tax owed based on the difference between the purchase and sale value of their property.  Which has the benefit of no tax being liable at all in the case of a loss between these two figures.

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Spain’s Constitutional Tribunal has annulled the Plus Valia Tax – a levy which until now had been applied to the transfer of ownership of property.

This could spell good news for any non-resident homeowners who are in the process of selling their property in Spain at the moment – as this new ruling could potentially save them a considerable sum of money.  Although full and final confirmation of this ruling is still pending subject to a review by the Ministry of Finance, who may yet replace this tax with another similar levy.

The Plus Valia tax was initially introduced as an anti-speculation measure and is calculated on two main criteria.  Firstly, the length of ownership.  And secondly the increase in the value of a property over the course of that ownership.

This tax is paid by the owner/vendor of a property and the amount payable depends on these two criteria.

For years this tax has been levied by local town halls on properties that are sold within their municipality, based on the valor catastral of a property – an amount that is loosely equivalent to its rateable value and which is normally set much lower than the purchase price or current market value.

And it is on this basis that the Spanish courts have acted to abolish the tax – as they have ruled that this calculation is entirely artificial and is based on a valuation that does not in any way reflect the real-world increases in actual property values.

Over the years it had become common practice for buyers based in Spain to withhold the amount of Plus Valia tax payable from the purchase price if the owner/vendor was a non-resident of Spain – in order to ensure that the tax was fully paid to the local town hall.

This is because the purchasers would become liable for any non-payment of this tax upon taking ownership of the property.

Given the amount of money that the Plus Valia tax has placed into the coffers of local town halls it is highly likely that this will be replaced with a new model in the not too distant future.  Whilst the Spanish tax authorities have also made it clear that they will not be accepting any retrospective claims for replayments.

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