New situation of the plusvalia tax.


State of the art of the plusvalia tax in Spain

In this post I refer to the situation of the plus valia tax.

We recalled that the Constitutional Court and the Supreme Court had established that the plusvalia tax was not due when properties were sold at a loss. Also, it was enough evidence to show that there is a loss when the purchase price was higher than the sale price.

That are good news.

Tax calculation issue

But the issue with the plusvalia now was the calculation method. As everybody knows this local tax is based on the increase of the value of the urban land (only the land and not the construction on it) when it is sold or it is inherited or donated. In the case of a sale the seller has to pay it. In the case of inheritance or donation the beneficiaries or donees have to pay the tax. The calculation formula only takes into account the rateable value at the time of the sale or inheritance or donation and the time elapsed between the previous sale, inheritance or donation. So rateable value by number of years. The number of years is multiplied by a figure (from 3,7 until 3) which varies depending on the number of years run. The result is applied as a percentage to the rateable value. The outcome is the tax base and on this you apply the tax rate set by each town hall. This is the formula. So, as it is easy to see, according to the law there will always be an increase of the value of the urban land. This is because the formula only takes into account the rateable value and the time run by between one transaction and the following one.

Consequently, this might lead to unfair situations as we pointed out in our aforementioned post.

Constitutional court ruling on plusvalia

The constitutional court published on October the 31st a press release (in Spanish) stating that they ruled on plusvalia again. You can read here in Spanish an article on the subject of one of the major Spanish papers. We do not have yet the full ruling to read but the Court advanced that when the tax to pay is higher than the real increase of urban land value the tax is against the law. It is against the principle that the tax system must not be confiscatory set in the Spanish Constitution. Therefore the tax is not due even if there is a real increase of the urban land value.

This is quite a reasonable decision.

More questions

But the ruling arises more questions. The Court says that it is void and null in some cases the article that sets the figure which is multiplied to the number of years as explained above. This means that in those cases the tax calculation is reduced very much. But just in some cases.

Besides, where do we put the limit? If the tax bill is higher than the real urban land value increase the tax is null. But how much higher? We need a certain limit otherwise we are still kept in legal insecurity.

New regulations are more than urgent

As the Constitutional Court said when ruled for the first time on the plusvalia in 2017 tax new regulations of this tax are urgent.

Now, more than then new regulations of this tax are urgent.

But I am afraid we will have to wait a little longer as Spanish politicians keep playing their favourite game which is arrange elections. And nothing else but elections.

Whenever something happens, we will keep you informed.

And when the full ruling referred to in this post is released we will try to explain the insides in detail.

Thank you

Thank you for your time and attention and I hope this information is of use. You are very welcome to share if you liked it.


Please, note that this is general information. This is not specific legal advice. It is advisable to seek legal advice for any specific legal issue.