In Spain, the specific tax that a property seller must consider at the time of sale is the “plusvalia municipal”, which is the tax on the increase in value of urban land (IIVTNU). However, the amount payable for this tax can vary significantly depending on several factors, including the location of the property, the length of time the seller has owned the property, and the increase in the cadastral value of the land during that time.
Municipal Capital Gains Tax (IIVTNU)
- Basis of Calculation: It is calculated on the increase in value of the land on which the property sits during the time the seller has owned it, up to a maximum of 20 years.
- Municipal Taxes: The applicable taxes are set by each local council within the limits established by law, and therefore vary from one municipality to another.
- Calculation: The calculation is based on the cadastral value of the land and the number of years the seller has owned the property. Each municipality applies a coefficient to the increase in value, which is then multiplied by the corresponding tax rate.
Other taxes and costs
In addition to the municipal capital gains tax, the seller must take into account other possible costs and taxes associated with the sale, although they are not property taxes per se:
- Capital Gain: If the seller makes a gain from the sale of the property (the difference between the sale price and the adjusted purchase price), this gain may be subject to income tax. For residents, it is integrated in their IRPF (Personal Income Tax) and for non-residents, a fixed rate is applied on the gain in the IRNR (Non-Residents Income Tax).
- Cancellation of Mortgage:If there is a mortgage on the property, the costs associated with the cancellation of the mortgage must also be considered.
This withholding system is an essential part of tax planning for both resident and non-resident sellers. Properly understanding it can help avoid surprises and ensure that the transaction is carried out efficiently from a tax perspective.
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