Taxes: Spanish Wealth Tax

Capital gains is a municipal tax payable to the local council and is based on the increase in the official value of the land between the dates of purchase and sale. The cadastral value of the property at the time of sale is used to calculate the increase in the value of the land. This is then multiplied by the annual rate set by the local council and the number of years the property has been owned is taken into account. Therefore, the factor that most influences the value of the Plusvalia is the number of years the property has been owned.

It is important to note that after several Spanish court rulings that the way this tax was calculated was not legal, the Spanish government passed a decree on 8 November 2021, which introduces substantial changes to the way this tax is calculated. The three most important changes are:

If the sale price declared in the deed is lower than the purchase price declared in the deed of sale, no capital gains tax will be payable.
In cases where the gain is low, but the capital gains tax is high, the taxpayer can choose an alternative way of calculating the tax, which will take into account both the purchase price and the sale price.
If the property is sold within one year of purchase, capital gains tax is payable.
It is important to note that when the seller is a non-resident, and although it is a tax on the selling party, the buyer is responsible for the payment of the Plusvalia, and therefore would like to withhold the amount calculated for this tax from the purchase price.

If the seller is a non-resident, the buyer is liable for the payment of the Plusvalia and should withhold 3% of the sale price on account of his possible tax liability. In addition, if the seller has no tax liability because he is losing money on the sale, or his liability is less than the 3% withheld, he will be entitled to a full or partial refund of the tax. However, the Tax Agency will take between 6 and 10 months to pay the refund and will check that he has been paying his tax obligations correctly.