The vagaries of the Spanish tax system can be confusing, especially when laws are changed several times in a short space of time, as was the case with Plusvalia (capital gains tax on property and land).
Here’s what happened… on the 25th October, Spain’s Constitutional Court abolished the tax and just two weeks later it was reinstated. The tax provides an important revenue stream for local government, so it is no surprise that has been brought back. However, it is surprising that the law has been updated to make the calculation process much fairer for the taxpayer.
How are the new plusvalia rules different?
Previously, the tax was calculated on the supposed value of the land, which was bad news if a property’s value hadn’t increased as much in real terms.
How to calculate the tax
Now here is the good news….under the new rules, if a property has not increased in value and as a result has been sold at a loss, no plusvalia tax will be payable (even if the land value is deemed to have increased). This is because there are now two ways to calculate the tax and it is possible to choose the most favourable method.
Here are the options:
• Option 1: The tax is calculated based on the difference between the purchase and sale price. This will give you the ‘real’ increase in value of the property.
• Option 2: Similar to the old method. You can opt to have the tax calculated on the change in the cadastral value of the land since it was bought.
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