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BREAKING NEWS on the reform of the municipal capital gains tax in Spain (from November 2021)
Written by Magalie Ortiz, 24 November 2021
The municipal capital gains tax is a tax that the seller of a property must pay to the town hall of the town where the property is located.

This is a tax that is levied on the increase in the value of the floor at the time of the sale of the property. Until now, it was calculated by multiplying the value of the floor (cadastral value of the floor) on the day of the sale, by the number of years the property had been held by the seller, and multiplied by a coefficient designated by the town hall.

However, this has all changed with the implementation of Royal Decree-Law 26/2001, of 8 November.

This new reform introduces two different options for determining the tax base:

1.- OBJECTIVE SYSTEM

The taxable base of the tax is obtained by multiplying the cadastral value of the ground of the building by coefficients determined annually by the Municipal Councils according to the number of years during which the building has remained in the patrimony of the seller.

This method is similar to the one used until now, but it must be taken into account that the coefficients will be revised annually according to the evolution of the prices of real estate sales that take place in the municipality.

2.- REAL VALUE-ADDED SYSTEM

The tax base is obtained from the difference between the acquisition price and the transfer price. This method can be chosen if the result is lower than that calculated using the objective system.

***  In the case of a loss of capital at the time of sale, provided that it can be justified, it will not be subject to this tax  ***


Let's take a concrete example:

A house is bought in 2011 for €500,000 and sold in December 2021 for €600,000.

The cadastral value of the house is €100,000 (this can be obtained from the IBI receipt), €60,000 being the value of the ground and €40,000 that of the building. Thus, of the cadastral value of the property, 60% is the value of the ground and the remaining 40% is the value of the building.

1.- OBJECTIVE SYSTEM : the tax is calculated by multiplying the value of the ground by the corresponding coefficient:
60.000€ * 0,08 = 4.800€ (tax base of the tax).

2.- REAL VALUE-ADDED SYSTEM : It is calculated by deducting the sale price from the purchase price:
600.000€ - 500.000 = 100.000€
As the value of the ground corresponds to 60% : 100.000€ * 60% = 60.000€ (tax base of the tax)


TAX TO BE PAID:

1.- OBJECTIVE SYSTEM : 4.800€ * 0,30(*) = 1.440€ (We have chosen this method because it is the most advantageous).

2.- REAL VALUE-ADDED SYSTEM : 60.000€ * 0,30(*) = 18.000€.

* For this example, we have used a tax rate of 30% (0.30) which is the maximum allowed by law, but which can vary according to each town hall, the maximum possible being 30%.

About the author: Magalie Ortiz

Founder and Managing Director of Investingspain, which specialises in wealth management advice and also works in banking. She founded Investingspain, a real estate advisory and investment company in 2009 to ensure that her clients' projects in Spain run smoothly. Her background as a French expatriate in Spain and her university studies (International Business and Executive MBA) in business management at the University of Barcelona allow her to guide her clients by always finding the best solutions and tips. 
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Provisional coefficients under the new law reform

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