Who pays municipal capital gains tax when a flat is sold? And what if it is sold at a loss?

Question

José Manuel Alburquerque · Accepted Answer

It is paid by the seller, who is the one who owes the tax to the town council. The law only requires the buyer to pay it instead of the seller when the seller is a person not resident in Spain. The buyer then deducts it from the price. Buyer and seller can agree that the buyer will pay it, unless the buyer is a private individual buying their home from a developer or other business that imposes that clause without negotiating it, because it is then unfair. If the land has not gained in value between the purchase and the sale, nothing is payable, but this has to be declared to the town council within the time limit and proved with the two deeds. Who pays it The “plusvalía municipal”, the municipal capital gains tax, taxes the rise in the value of the land while the flat has belonged to the seller, so it is the seller who owes it. There are three situations that change who pays it in practice: If the seller is a person not resident in Spain, the law requires the buyer to pay it on the seller's behalf. The buyer deducts it from the price. If they agree that the buyer will pay it, the agreement is valid between them, but not against the town council. If the buyer does not pay it, the council will claim it from the seller, who can then claim it back from the buyer. If the buyer is a private individual purchasing their home from a developer or other business, the clause passing the tax on to them is unfair and invalid, according to the “Tribunal Supremo”, Spain's Supreme Court, when the business imposes it without negotiation. If the buyer has already paid it, they can ask in writing for it to be refunded. Before suing, the law requires an attempt at negotiation. If the flat is sold at a loss It does not have to be paid if the land has not gained in value. To find out, the purchase value and the sale value are compared using these rules: For each deed, what counts is the price stated in it or, if higher, the value checked by the authorities, for example when assessing the “impuesto de transmisiones”, the property transfer tax. Expenses and taxes are not added, such as notary's fees, property transfer tax, estate agent's fees or building works. Nor is any allowance made for inflation. As the tax is only on the land, both values are multiplied by the percentage that the land represents in the flat's cadastral value, according to the bill for the IBI, the local property tax, for the year of the sale. If the flat was inherited or received as a gift, the purchase value is the value declared for the “impuesto de sucesiones” or the “impuesto de donaciones”, the Spanish inheritance and gift taxes. That is why selling at a loss does not always get you out of the tax. Someone who bought for 200.000 euros, paid 20.000 in taxes and expenses and sells for 210.000 loses money, but for the purposes of this tax the flat has gone up by 10.000 euros. If the land accounts for 40 % of the cadastral value, the land has gained 4.000 euros and the tax is payable. However, they can ask for the tax to be calculated on those 4.000 euros if the normal calculation gives a higher figure. What you need to do The tax is filed with the town council where the flat is located within thirty working days of the deed, about six weeks. In Barcelona, the seller has to calculate and pay it themselves, which is known as self-assessment. If there has been no gain, this must still be declared within that time limit, together with the purchase and sale deeds. Otherwise, the council may assess the tax using the normal calculation. Municipal capital gains tax is not the same as the “IRPF”, Spain's personal income tax, which taxes the gain on the sale in the seller's income tax return. Whatever is paid for it is deducted from that gain.