The Increase in Value of Urban Land (IIVTNU), commonly known as the capital gains tax or capital gains tax, is a delimited tax in the local tax system of Spain whose objective is to tax the increase in value of the urban land once transferred, that is, during the time they are owned. In this way, this capital gains tax would have to be paid both at the time it is sold and when said property is obtained by inheritance or donation.
It would be appropriate to specify that the tax is produced after the transfer of the land, regardless of whether there is a building or not. For this same reason, when the transfer of a home is agreed, what is taxed is the transfer of the land on which it is built, not taking into account the building itself.
Being of a municipal nature, each municipality will mark different percentages in order to determine the value of the home. Therefore, the amount to be paid will vary depending on where the corresponding property is located.
In this sense, it is based on an optional tax that is only claimed in those municipalities that so wish, in order to achieve higher income. Thus, the new capital gains tax is direct, real and accrues instantly.
A tax, on which the Constitutional Court has issued three sentences. The last of them on October 26, 2021 (182/2021), in which it declared the unconstitutionality and nullity of sections 1, 2a) and 4 of article 107 of the revised text of the Law Regulating Local Treasuries, approved by Royal Legislative Decree 2/2004, of March 5.
Who does it apply to?
We start from the premise that the new capital gains tax contemplates as a taxable event the increase in value that affects urban land caused by its transmission or as a consequence of the constitution of a real right that has a limited domain enjoyment, or of its transmission.
This implies that, for example, if we talk about any locality, see Madrid, the following would be taxpayers as taxpayers of the capital gains tax in Madrid:
- The acquirer of the land or the beneficiary of the right in rem (whether natural persons or legal persons and even the community property contemplated in article 35.4 of the General Tax Law) who intervene in said acts and businesses for profit,
- Individuals, legal entities and/or community property of article 35.4 of the General Tax Law that constitute the real right in question, or transmit that right or the land, for consideration, regardless of what is privately agreed between the parties.
- The figure of the substitute taxpayer taxpayer is also contemplated in the case of businesses or acts carried out for consideration in which the transferor does not reside in Spanish territory, in which case the purchaser of the land or the subject must assume the payment. that benefits from the constitution or transmission of the right in rem (whether it is natural or legal persons, or even the communities of property contemplated in article 35.4 of the General Tax Law).
How is it calculated?
For the calculation of the tax there are two rules or procedures: the real and the objective. The taxpayer may choose the method that is most beneficial.
- The actual procedure is calculated on the difference between the actual cost of the purchase and the actual cost of the sale.
To carry out the calculation in this method, the Transmission Value of the home (sale) will be taken into account, less the Acquisition Value of the home (the price paid when acquiring it), multiplied by the Percentage of the Catastral Value of the land. (a piece of information that we can obtain from the IBI or through the online headquarters of the Cadastre).
- In the objective procedure, the tax on the cadastral value of the year of purchase and the year of sale is calculated, which will be updated annually. This procedure takes into account the increase in land value, showing the reality of the real estate market and its fluctuations. In this case, if the taxpayer demonstrates that the real capital gain is less than that of the objective method, the real capital gain may be applied.
It is established that the tax base of the capital gains tax will be the result of multiplying the cadastral value of the land at the time of accrual by the coefficients approved by the Town Halls, which may not exceed those shown below depending on the number of years elapsed since the property was acquired:
These coefficients are updated annually by means of a standard with legal force, and said update can be carried out through the General State Budget Law, taking into account the evolution of the real estate market.
In addition, if as a result of this update any of the approved coefficients is higher than the new legal maximum, this will be applied directly until the new tax ordinance that corrects it enters into force.
The Town Halls may reduce, only for the purposes of this tax, up to 15% of the cadastral values of the land depending on their degree of updating.
Each municipality has its own Tax Rate. Let's see some examples of different CCAAs:
Calculation of municipal capital gains in Barcelona
- By the objective method.
He acquired the house 3 years ago with a cadastral value of 190,000 euros.
Tax base: 190,000 euros (cadastral value of the land) X 0.16 (coefficient corresponding to this period) = 30,400 euros.
And its Tax Rate, which corresponds to 30%, would therefore be: 30,400 euros X 0.30% = 9,120 euros of tax liability.
- By the royal method.
House of the example seen previously, which was bought 3 years ago for 210,000 euros, and which is sold for 240,000 euros. Your capital gain will be 30,000 euros. Therefore, its Taxable Base would correspond to 15,000 euros (we calculate the cadastral value of the land on the cadastral value of the house that we imagine is 50%. Therefore: €30,000 X 0.50%).
If, finally, we apply the Barcelona Tax Rate, which is 30% (€15,000 X €0.30), we would obtain a tax rate of €4,500.
Taking this example into account, the taxpayer would opt for the real method, since the tax amount to be paid will be less than if he did so using the objective method.
Calculation of municipal capital gains in Madrid
- By the objective method.
If we use the same example seen above, and the house was purchased 3 years ago with a cadastral value of 190,000 euros.
Tax base: 190,000 euros (cadastral value of the land) X 0.16 (coefficient corresponding to this period) = 30,400 euros.
And its Tax Rate, which in the case of Madrid corresponds to 29%, would be: 30,400 euros X 0.29% = 8,816 euros of tax liability.
- By the royal method.
For the taxpayer who bought his home 3 years ago for 210,000 euros, and now sells for 240,000 euros, his capital gain will be 30,000 euros. Therefore, its Taxable Base would correspond to 18,000 euros (we calculate the cadastral value of the land on the cadastral value of the house, which is 60%. Therefore: €18,000 X 0.60%).
Finally, if we apply the Madrid Tax Rate, which is 29% (€18,000 X €0.29), we would obtain a tax rate of €5,220.
Taking into account the example of the Community of Madrid, the taxpayer would also opt for the real method, since the tax amount to be paid will be less than if he did so using the objective method.
News in the new capital gains tax
a) Exemption from the payment of capital gains
One of the novelties is the exemption from the payment of said tax if it is shown that after the transfer of the house, no increase in value has been obtained. That is to say, that the house was acquired at a higher price than the price at which it was subsequently sold. The City Councils will be able to verify if this has happened through the documents that the taxpayer accredits (the titles that document the transmission and acquisition).
b) Capital gains of less than one year must also be taxed
Capital gains generated in less than a year must also be taxed. If less than a year has elapsed between the date of acquisition and transmission, now they must also pay taxes.
How to carry out the procedure
The municipal capital gains tax is a local tax and the documentation must be provided in the town where the property is located, which does not necessarily have to be the residence.
Like any municipal tax, it must be presented at the City Council citizen service offices, at the Registry Offices of the General State Administration, of the Autonomous Communities or of the Local Administrations.
The format provided by the Fiscal Ordinance must be completed, which collects the data needed by the City Council to carry out the liquidation of the municipal capital gains tax.
You must also accompany the documentation of the sale transaction of the apartment.
There is a period of 30 business days from the date on which the transmission occurs to present it.
Once the liquidation of the municipal capital gains has been carried out by the City Council, it will notify it indicating:
- amount to pay
- resources that can be filed
- exemptions (if applicable).
- term to pay it.
When is it paid
- By transmissions inter vivos.
The payment of the capital gain must be made by the person who transfers the property. This is the case whether it is a transfer of property or a transfer of a real right of limited enjoyment of onerous (purchase-sale) or free (donation) domain. The term to present the declaration is 30 business days from the transfer of the domain or from the constitution or transfer of the right in rem.
- For transmissions mortis-causa.
The surplus value corresponds to the person who acquires the property. In the case of mortis-causa transmissions, the term is six months from the date of death, extendable for another six months by requesting said extension within the first five months.
Documentation to provide mortis causa
- Copy of the inheritance award deed or, failing that:
- Private partitioned notebook if any.
- Certificate of acts of last will.
- Will or, where appropriate, declaration of intestate heirs.
- If so, a copy of the self-assessment or Inheritance and Gift Tax statement stating the valuation of the assets.
- Copy of the acquisition titles of the properties object of the transfer (only if the acquisition date is not stated in the transfer title).
When a mortis causa transfer of property occurs, the taxable event of the tax on the increase in value of urban land is carried out.
A declaration must be submitted, in transfers of domain (property), in the constitution or transmission of any real right of enjoyment, limiting the domain (usufruct, right of surface, right of use and habitation...), in the cases of non subjection, less than one month, exemption, prescription or transmissions.
Deadlines
- For self-assessment and declarations without a fee to enter, it will be six months from the day of the death of the person responsible.
- An extension can be requested within the initial period of six months from the date of the taxable event (death of the deceased).
The plague of municipal capital gains prescribes after four years. This period begins to run from the day after the end of the voluntary payment period.
Source ElDerecho.com - 01-13-2023