Plusvalía: the capital gains tax: calculation and details 2025
The Municipal Capital Gains Tax (Plusvalía) in Mallorca and Spain: Who pays this tax, when, and how is it calculated? All important information.
The tax on the increase in value of urban real estate, commonly referred to as the municipal capital gains tax or plusvalía, is a direct municipal tax levied on the increase in value of urban land during the period of ownership until the time of transfer. This tax is due when urban real estate is sold, inherited, gifted, or otherwise transferred.
Who is liable to pay the capital gains tax?
The obligation to pay this tax depends on the type of property transfer:
- In the case of a sale (compraventa): The seller of the property is liable to pay the tax. However, it is possible to agree on a different arrangement contractually, although the legal responsibility primarily lies with the seller.
- In the case of a gift (donación): The recipient, i.e., the person who receives the property free of charge, is obligated to pay the tax.
- In the case of an inheritance (herencia): The heir or heirs who acquire the property through inheritance are liable to pay the tax.
When does the tax liability arise?
The liability for the municipal capital gains tax arises at the time of transfer of ownership of the property. This can occur through a sale, a gift, an inheritance, or another form of ownership transfer. The decisive factor is the legal transfer of property ownership.
Deadlines for the Payment of Capital Gains Tax
The deadlines for processing and paying the tax vary depending on the type of transfer:
- For transfers inter vivos (e.g., sale, gift): The deadline is 30 working days from the date of transfer.
- For transfers mortis causa (inheritance): The deadline is six months from the date of death of the testator. This deadline can be extended by a further six months upon request.
It is advisable to contact the relevant municipality for information about the exact deadlines and procedures, as local differences may apply.
It is advisable to check with the relevant municipality for details of the exact deadlines and procedures.
Calculating Municipal Capital Gains Tax: Two Methods
A significant change resulting from court decisions in recent years concerns the calculation of capital gains tax. There are now two methods for determining the tax base, and taxpayers can choose the method that is most favorable to them:
1. Objective Method (Método Objetivo):
This traditional method is based on the cadastral value of the land at the time of transfer and the number of years the property has been owned by the transferor. It is calculated by multiplying the cadastral value of the land by a coefficient set by the municipality. These coefficients are updated annually and reflect the assumed average value development in the local real estate market. Municipalities set these coefficients within legal limits.
Simplified formula: Tax base = Cadastral value of the land x Coefficient (depending on the holding period).
The tax rate set by the municipality is then applied to this tax base, which may not exceed 30%.
2. Real Gain Method (Ganancia Real):
This method was introduced to account for situations where the actual increase in value is lower than that calculated using the objective method, or where no gain has been made at all. It determines the actual increase in value of the land between the acquisition and the transfer.
The calculation is based on the difference between the transfer value (sale price, value in the inheritance/gift tax return) and the acquisition value of the property. This difference is then weighted by the percentage corresponding to the cadastral value of the land in relation to the total cadastral value of the property.
Simplified formula: Assessment basis = (Transfer value - Acquisition value) x (Cadastral value of land / Total cadastral value).
Here, too, the applicable municipal tax rate is applied to the determined assessment basis.
If you have the cadastral reference for a property, you can calculate the municipal capital gains tax for each municipality in Mallorca here: sede.atib.es - simulador-plusvalia
Taxpayer's Right of Choice and Proof in Case of Loss
The taxpayer has the right to carry out the calculation using both methods, or to have them carried out, and to choose the one that results in a lower tax burden. This is an important protective mechanism.
Another crucial point is that if it can be proven that no increase in the value of the land was achieved during the transfer of the property, or even a loss was incurred, no municipal capital gains tax is payable. This has been a central point in several rulings of the Spanish Constitutional Court. Proof is usually provided by submitting the notarial deeds of acquisition and transfer of the property, which show the respective values. The municipality verifies this evidence.
Special Features of Inheritances and Gifts
Inheritances and gifts are subject to taxation by the acquirer (heir or donee). The calculation is carried out analogously to the methods described above. The transfer value is generally the value stated in the inheritance or gift tax return. The acquisition value is the value at which the testator or donor originally acquired the property, or the value from a previous inheritance/gift.
Tax Exemptions and Reductions
The law provides for certain cases in which no capital gains tax is payable or in which reductions are granted. These may include, for example, transfers between spouses under certain property regimes, transfers to public institutions, or certain corporate restructurings. Here, too, it is advisable to check local regulations, as municipalities may provide additional benefits.
Conclusion and Current Developments
The regulations governing municipal capital gains tax have been the subject of intense legal discussions and adjustments in recent years, particularly following the rulings of the Constitutional Court. The introduction of the option to choose between objective calculation and calculation based on real profit, as well as the stipulation that no tax is payable if there is demonstrable lack of capital gains, are the most important results of this development.
It is essential for property owners and potential buyers or sellers in Spain to familiarize themselves with the basic principles of this tax. The precise calculation can be complex, and the local regulations of the respective municipality must always be taken into account. A careful examination of the acquisition and transfer values, as well as the holding period, is crucial for correctly determining the tax and, if necessary, choosing the most favorable calculation method. Given the complexity and potential financial implications, professional tax advice may be advisable to correctly handle all aspects and optimize the tax burden.