Should You Have to Pay the Plusvalia (Town Hall Tax) on Property Sales?

The Administrative Courts have begun to annul the the plusvalia taxes on properties where property values have either devalued or remained static. This will mean that vendors of these properties should not have this tax levied when selling or transmission of their homes.

According to the town halls, when selling a property at a loss, you are still expected to pay the Plusvalia tax. (Tax on the increase in value of land) However, the courts are beginning to take a different view.

Articles 104 to 110 del of the Law of local taxes approved by the Royal Decree 2/2004 March 5 regulates the taxes on the increase of the value of urban land and known as the ‘Plusvalia’. This is grounded in article 47 of the Spanish Constitution where it states:

”The community will participate in the benefits generated by the urban activities of the public authorities”

According to the article 104 of the above mentioned Royal Decree. the Plusvalia is a direct tax generating an increase by the change of ownership or any type of transmission including payable on the death of a title holder when the property is inherited by another including in the case of ‘uso fructo’

Taking the above into consideration, I can categorically state and without any reservation that for a tax to be implemented would rely on three elements.

1.Legal transition of transfer of ownership or the transmission of the property with right to appreciate the results.

2.The land would need to be urban.

3.That there has been an increase in the value of the property form the date of purchase to the sale date.

As stated above, one requirements for a sale to be subjected to a capital gains tax would be that the assets had increased in value.

Noting that the value is calculated by the ‘valor catastral’ which is revised periodically and not by the real market value. This can be contested and the real value of the property can be used in evidence.

A court in Catalonia had already found in a case that simply put ‘that as there was no increase in the value of the asset’ the sale or transmission cannot be subject to a tax liability.

The town halls insist that the plusvalia should be paid within thirty days, to avoid surcharges the amount should be paid and a lawyer instructed to make a claim for a refund.

For further information or to discuss your personal situation, email: info@citizensadvice.org.es

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.