Following the ruling of the Spanish Constitutional Court, which declared the method used by local councils to calculate the Plusvalía tax to be outdated, a new Royal Decree-Law has been issued in Spain, which opens up new steps for calculating of this tax and also opens up possibilities for appeals for unfair calculations under the previous law. The new Royal Decree-Law offers two calculation and payment alternatives, from which you can choose the one that best suits your interests:
Alternative I
Objective system: it consists in multiplying the cadastral value of the land by the new coefficients established by the municipalities, which must not exceed the minimum and maximum values established in the new Royal Decree.
Alternative II
Actual system: private individuals may opt for this method if the difference between the sale price and the purchase price is lower than the tax base calculated according to the objective system.
Do I have to pay if I own the property for less than 1 year?
One innovation of this Royal Decree is that previously you did not have to pay plusvalía tax if you bought a property and then transferred it within one year. From now on, however, you will have to pay. A new coefficient has been set for this period. Moreover, the coefficients are highest between 1 and 4 years, which means that if you sell your property during this period, you will have to pay more Plusvalía tax.
Are there tax reductions?
On the positive side, some articles that were already established in the previous law are maintained, such as the 95% reduction for transfers by inheritance in favour of descendants, relatives in direct line, adopted children and spouses. However, we advise great caution in the sale of a NON-RESIDENT’s property, as the law still requires the buyer to withhold the amount of Plusvalía tax on behalf of a NON-RESIDENT seller at the time of transfer of the property.
Following a report by the Court of Justice of the European Union, there should certainly be new news soon. This report states that the limitation periods for compensation claims in Spain are illegal under EU law.
If at any time you need to prove that you have not paid this tax, you will need various documents that the tax office or the town hall of your municipality will ask you to provide.
