capital gain tax

A change in the capital gains tax: “la plusvalia”

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On October 26, 2021, the Constitutional Court decided to override the method used for the plusvalia tax calculation and collected by the town halls and the government immediately offered an alternative method.

What is the plusvalia tax?

It is a tax based on the increase in the value of urban land (IIVTNU). It is a tax managed by the town halls and taxes on the urban land revaluation on which a property is built from the time of its acquisition until the date of its transfer, either by sale, inheritance, or donation.

Who had to pay this tax?

This will depend on the type of transmission of the property.

In the case of a sale and purchase, it is the seller who has to pay the tax, as he is the one who revives the money from the sale.

In the case of donations, the tax is paid by the person who receives the donation, the same thing happens in the case of inheritances, since it is the heirs who have the obligation to pay.

What has the Constitutional Court decided?

The Court has decided that the method of calculating the taxable amount of this tax is unconstitutional.

They declared the formula for calculating the tax null and void, on the grounds that the calculation is based on a percentage that depends on the years elapsed from the acquisition of the property until its transfer and not on its price, so it always came out to pay and they demanded the payment, even when losses were recorded.

Will the resolution have any retroactive effects?

The Constitutional Court pointed out that the resolution does not have retroactive effects, therefore, claims that already have final judgements from Court will not be able to benefit, only those who are currently being processed will be eligible.

What is the new method for calculating this tax?

From November 10th of 2021, the new capital gains tax calculation rule will come into force, offering two scenarios for calculating the amount on which the tax will be levied:

The first scenario is based on multiplying the cadastral value of the property at the time of applying the tax by the coefficient approved by the Town Halls, which will be in accordance with the elapsed years of the increase in the value of the land.

The second scenario will allow taxation depending on the increase in the real value acquired in the transfer of the property.

It should also be noted that all transactions in which less than one year has elapsed between the acquisition and transfer of the property will now have to pay this tax.

What happens if there is no increase in the value of the property?

In these cases, you will not have to pay the tax, but you will have to prove it and provide the necessary documentation of the transfer and acquisition of the property.

Also, the purchaser will have to update the period in which he/she has been the owner of the property to calculate the future transfer.

In case you need more information do not hesitate to contact us at Pellicer & Heredia. We have a professional and dedicated team that has many years of experience in legal and tax advice.

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