Capital gains tax on property, known as plusvalía fiscal, refers to the profit obtained after selling a property compared to the price at which it was originally purchased.
When a property is sold at a higher price than its purchase price, the seller — whether an individual or a legal entity — must declare this gain and pay taxes on it. This is done through the Personal Income Tax (IRPF) for individuals or the Corporate Tax (Impuesto de Sociedades) for companies, depending on the case.
How Is the Capital Gain on a Property Calculated?
The municipal capital gains tax (plusvalía municipal) is calculated based on the value of the land, not the value of the building itself.
To calculate it, you need to know the cadastral value of the land. The tax is based on the difference between the cadastral land value at the time the property was purchased and the cadastral value when it is sold.
When Must the Capital Gains Tax Be Paid?
The tax rate applied to the municipal capital gain is determined by the local municipality, which is responsible for managing the tax. However, the rate cannot exceed 30% of the property's value.
Who Is Exempt from Paying the Capital Gains Tax?
There are several situations in which the municipal capital gains tax does not have to be paid. Some of the most common exemptions include:
- When the tax payable exceeds the actual profit obtained from the sale of the property.
- Property transfers between spouses or to children when they occur as a result of court rulings related to marriage annulment, separation, or divorce, regardless of the marital property regime.
- Allocation of properties by housing cooperatives to their members.
- Termination of usufruct rights due to the death of the usufructuary or the expiration of the agreed term.
- Distribution of benefits resulting from municipal urban planning processes.
- Transformation of companies, such as when partnerships or limited companies are converted into corporations.
How Long Do You Have to Claim a Refund of the Capital Gains Tax?
The timeframe for claiming or contesting the municipal capital gains tax depends on several conditions. Some of the main requirements include:
- The property was sold at a loss.
- The property was not acquired through donation, inheritance, foreclosure, or debt settlement (dación en pago).
- No more than one month has passed since the tax assessment was issued.
If the tax was paid through self-assessment, the period to request a refund can extend up to four years.