The sale of a property on the Costa Blanca entails various tax obligations for property owners. One of these is the municipal capital gains tax, better known as Plusvalía Municipal. This tax is levied on the increase in value of the land on which the property is located. But who has to pay it? Are there any exceptions? And what are the consequences of non-payment? We shed light on the most important aspects of this tax.
Who is liable to pay?
The obligation to pay the Plusvalía Municipal depends on the type of transfer of the property:
▶ Sale: As a rule, the seller must pay the tax.
Gift: Here, the recipient bears the tax burden.
▶ Inheritance: The heirs are obliged to pay the tax.
When is the tax liability cancelled?
There are certain situations in which the Plusvalía Municipal does not have to be paid:
▶ No increase in value: Since 10 November 2021, tax is no longer due if the property was sold at a loss.
▶ Property value remains the same: If the value of the property has not increased, there is no tax liability.
▶ Transfers between spouses: For example, as part of a gain equalisation or to support children.
▶ Culturally protected properties: The prerequisite is proof of necessary maintenance or improvement work.
▶ Transfers of ownership to charitable organisations: These include the state, social organisations or the Spanish Red Cross.
Areas used for agriculture:
Certain agricultural properties are tax-exempt.
▶ Debt repayment through property assignment: If a property is transferred to repay a mortgage debt, the tax is not due.
Which special regulations apply to heirs?
Tax liability may also be waived in the case of inheritances:
▶ Agricultural land: Heirs of agricultural land do not have to pay capital gains tax.
▶ Loss of value of the property: If the property has lost value since it was acquired by the deceased, there is no tax liability. This must be confirmed by a self-assessment with supporting documents.
Consequences of non-payment
If the tax is not paid on time, the municipality will charge interest on arrears:
5% for payment arrears of up to three months
10% at three to six months
15% at six to twelve months
20% for over one year
Is there a limit with many years of ownership?
Yes, even if a property has been owned for decades, the Plusvalía Municipal is calculated for a maximum of the last 20 years. The decisive factor is not the length of ownership, but the increase in value during this period.
Municipal capital gains tax is a key factor in the sale or transfer of property on the Costa Blanca. Whilst it often applies, there are various exemptions and special regulations. Owners should therefore inform themselves at an early stage in order to avoid tax disadvantages or to take advantage of possible exemptions.