New rules for Spanish plusvalía capital gains tax

Earlier this autumn, the Spanish Constitutional Court declared the system of calculating plusvalia capital gains tax as unconstitutional. As a result, the beneficiaries of this tax (local councils) all over Spain were left without a valuable source of income almost overnight. Unsurprisingly, it hasn’t taken the Spanish government to come with a new system, in operation since 9 November. This article describes the new Spanish plusvalía capital gains tax.

Reasons behind the change

The main reason the Spanish Constitutional Court came to its decision was because it considered plusvalia capital gains tax as unfair. The local tax, applied on all properties when they are sold, took it for granted that the seller had made a profit, i.e. sold the property for more than its purchase price.

However, as many foreign owners of property in Spain have discovered, selling for a profit isn’t always a given. When the property market is down, few homes sell for more than their purchase price and as a result, sellers lose out when they pay plusvalia capital gains.

Find out how to save taxes when selling your Spanish property.

Two systems instead of one

To address this imbalance, the Spanish government has come up with a process that applies two systems instead of one. Sellers are free to choose the one that suits their pockets best.

System one – difference between purchase and selling price

One of the new ways of calculating the tax is to prove to the Spanish tax authorities that you haven’t made a profit on the sale and that by extension, there are no capital gains.

If you opt for this system, you must prove you have no gains by showing the authorities the documentation for your original purchase and the sale. The advantage of this process is that you can show your real gain, rather than a hypothetical gain.

System two – multiple of land value according to market situation

The second way of calculating Spanish plusvalia capital gains tax is slightly more complicated, although it isn’t dissimilar from the old system.

To work out the amount of tax due, you must multiple the cadastral value of the land at the time of selling by the coefficients in place at your local council. These figures also take into account how long you owned the property before you sold it. The coefficients are updated annually by councils and depend on the situation in the property market at the time.

Don’t leave anything to chance – get professional tax advice in Spain

Plusvalia payable even on short-term ownership

Short-term investors in Spanish properties will also now be liable for Spanish plusvalia capital gains tax. Under the new legislation, you are liable for the tax even if you have owned the property for less than a year.

Get professional advice

As with all taxes in Spain, plusvalia capital gains tax is complicated. To ensure you pay only the amount you’re due and no more, contact our professional team. They will advise you on which tax option suits your situation best so that you pay as little capital gains tax as legally possible.

Maria Luisa Castro

Director and Founder
María founded CostaLuz Lawyers in 2006 and is the Firm’s Director. María is registered Lawyer number 2745 of the Cadiz Bar Association and is licensed to practice in all areas of law throughout Spain. Working closely with her team, María has developed the firm into one of the most highly regarded and trusted Spanish Law Firms acting for English-speaking clients with legal problems in Spain. We’re here to help. Contact us today for a free no-obligation consultation.
 

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