The Tax Increase in Value of Urban Land (Plusvalía) is a direct and optional municipal tax.
What land is taxed?
Only land of urban nature, not of rustic nature. Tax is on land value and not on building value. Generally, the cadastral value.
These cases are not subjected to tax:
- Contributions of assets and rights by spouses to marital goods community, allotments in their favor and transmissions that are made to spouses in payment to their common assets.
- Transfers of property between spouses or on behalf of children, as a result of the enforcement of judgments in cases of annulment, separation or marriage divorce, whatever the matrimonial regime.
- The case of a merger or takeover of companies or industries, if it involves the continuation of activities.
- Contributions to compensation boards, awards for subdivision of lands and mandatory assignments to urban municipalities.
Who has to pay Plusvalia?
In case of transmissions by lucrative title (eg: donations or inheritances) the person acquiring the property or for which a real rights is transmitted.
In the event of transfers by onerous title (eg: a sale) the person transmitting the property or real right.
Covenants arising between the parties in regards to Plusvalía are not obligatory to the Tax authorities.
If the payer is a foreign resident, law provides that tax will be paid by the substitute payer, who is the other party involved in the transaction.
Exemptions and discounts
Most significant exemption is for the transmission of goods included in historic-artistic areas or who have been individually declared as cultural assets when their owners can prove they have performed works of conservation, improvement or rehabilitation.
There is other exemption when the amount of the resulting clearance is less than 6 euros.
In terms of bonuses, the most important one is that referred to transmissions by death. This bonus is optional for the Local Council and can reach 95% of the whole amount. The substantive and formal aspects of this bonus are to be established by the City Council in its tax regulations.
Another bonus is applicable under Law 49/2002 on the taxation of non-profit entities, which will apply to goods already subsidized in the IBI.
Items for determining the tax amount
The necessary elements to determine the tax amount to be paid are twofold: tax base and tax rate.
Tax base is the increased land value shown at the time of accrual and experienced over a maximum period of 20 years. The two elements that must be taken into account in calculating the tax base are: the land value and the percentage increase.
- The value of the land: The cadastral value at the time of the chargeable event.
-In the case of usufruct, calculation will be made according to standards established in the regulations governing transfer tax and stamp duty
-In cases of expropriation of land, value to be used is the appraisal value (justiprecio). If the cadastral value is lower, this will be used.
- The percentage increase is calculated by multiplying the number of full years since the last transmission by a coefficient established by the City. This ratio can be adjusted within the limits established in the Local Finance Law.
The tax rate is determined by the City Council in the regulatory tax ordinance, without exceeding 30%.
How is the tax calculated?
The calculation of the tax revolves around two elements:
- The increase in land value, which is determined objectively.
- The tax rate, which is established by the Local Council.
As elsewhere in the tax system, different tax acmounts can be distinguished:
- The gross tax payable: results from applying the tax rate to increase land value calculated objectively.
- The net amount results by decreasing gross amount with bonuses.
- The differential fee: in the case of IVTNU is same as payable net amount, since there are no payments on account, installment payments, withholding or similar concepts.
Chargeable event
The tax accrues at the time of transmission when transfer is made inter vivos. Most common fact is a sale where the chargeable event will be on the deeds date.
However, in cases of transmission through death, chargeability does not occur on the date of acceptance of the inheritance, but at the time of death of the deceased.
Tax declaration
In cases of inter vivos transfers, deadline for filing is 30 working days from the date of transmission.
In cases of transfers upon death, deadline will be 6 months, extendable to six months more on request of the interested party.
Late declarations
- If declaration is made within three months following the deadline for filing, a surcharge of 5% will apply.
- If declaration is made between the third and sixth month, surcharge will be of 10%.
- If declaration is made between the sixth and twelfth month, surcharge will be of 15%.
- From the twelfth month, surcharge is of 20% with application of delay interests from month twelfth.
If payment of the tax debt is done voluntarily, there will be a 25% reduction of the amount which has been charged for late declaration.
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