MODIFICATIONS OF THE TRLHL IN THE IIVTNU («MUNICIPAL PLUSVALIA») BY RDL 26/2021 (BOE 9/11/2021, IN FORCE SINCE 10/11/2021).
Sales of properties in Spain are taxed with 2 taxes:
– Capital Gains – Tax on the profit obtained from the acquisition and the sale of the property . This tax is paid to the Central Government (Madrid)
– Plusvalia Tax – Tax on the increase of the value of the land. This tax is paid based on the increase o the value of the land where the construction is placed, and it is paid to the local Government (Town Hall).
During decades, Spanish local authorities were taxing sales of properties with a Tax called PLUSVALIA. Basically, this is a tax on the increase in the value of the land on which your property is located, from the moment of purchase and sale.
The way to calculate this tax depends on specific criteria of the City Council.
The point here was that the way to calculate this tax was really subjective from the part of the Spanish authorities. In such a way that in the majority of the cases, sellers were forced to pay this tax, even if they were selling with no profit.
In other words, there were cases in which the seller was selling for a price LOWER that the price of acquisition (so, no profit obtained). So, in a high number of cases, and even sellers were not taxed on Capital Gains, the Town Hall might consider that the price of the land at the time of the sale could be higher from the time of acquisition. As result, there were cases in which sellers, even selling with lost, or with no profit, were forced to pay the Spanish local Plusvalia.
This system has been modified with a recent normative in December 2021:
‘There shall be no tax on transfers of land in respect of which there is no increase in value due to a difference between the values of such land on the dates of transfer and acquisition.’
- OBLIGATION TO “DECLARE” : There is an obligation of declaration of the tax according to the regime of each municipality. So, it means that, even selling the property without profit.
- OBLIGATION TO PROVE NO PROFIT: It is necessary to prove the absence of an increase in value by the taxable plot.
And such accreditation must be done by following the following steps:
(I) In principle, in accordance with the jurisprudence of the Supreme Court, due to the contrast between the acquisition title of the current transferor and the transfer title that carries out the taxable event.
(II) The value of the acquisition title may not include the expenses or taxes paid at the time, nor may it be updated. Obviously, the current value of transmission cannot be reduced with the expenses and taxes derived from it.
.- If what is transmitted is urban land exclusively, the comparison is direct.
.- If what is transmitted is a built property (land and construction) the value of the land must be delimited exclusively according to the proportion that corresponds to it in the cadastral value corresponding to the land in the current transmission, both to fix the value of the land in the current transmission and the value of the land in the previous acquisition.
If this legal proof has been complied with by the taxable person, it has full binding effects for local administrations.
.- Exceptional rule of determination of the generation period for the purposes of future transmissions when the current transmission has been not subject due to the absence of an increase in value.
For the purposes of subsequent transmissions to the current one, the generation period is computed from the date of the current transmission, even if it has not been subject due to the absence of an increase in value.
– DETERMINATION OF THE TAX BASE WHEN THERE IS AN INCREASE IN VALUE. NEW WORDING OF ART. 107 OF THE TRLHL.
.- Objective calculation of the tax base.
If there is an increase in value, it is only necessary to resort to the means of objective determination of the taxable base of the new article 107 of the TRLHL, substantially similar to the previous one:
(I) The cadastral value corresponding to the land is applied.
(II) The generation period is from month +1 (the non-taxation of transmissions made in the first year from the last subject transmission disappears) to a maximum of 20 years, computing full years, unless it is less than one year (in this case the annual coefficient is prorated taking into account the number of full months, that is, without taking into account the fractions of a month).
(III) The coefficients set by the municipal ordinances of each municipality are applied.
In addition, special rules are provided in the cases of:
.- When the land, even if it is of an urban nature or integrated into a real estate of special characteristics, at the time of the accrual of the tax, does not have a certain cadastral value at that time, the city council may practice the liquidation when the aforementioned cadastral value is determined, referring to said value at the time of accrual. In this case, self-assessment is excluded in any case, being subject to the liquidation regime (new wording of section 4 of article 110 of the TRLHL).
Limitation of the taxable amount to the increase in effective value when this circumstance has been proven by the taxable person in the terms foreseen for the case of non-subjection due to the absence of the increase in value and the taxable base of the objective method is higher.
The single DT of the RDL, establishes two rules:
(I) The municipalities where this tax is in force (remember that it is optional), must modify, within six months of its entry into force, their respective tax ordinances to adapt them to the provisions of the same.
(II) Until such modification, the rules of the RDL are directly applied, taking, for the determination of the taxable base of the tax, the maximum coefficients established in the new article 107.4 of the TRLHL.
(Updated December 2021)