Hélène Marchand lives in Lyon and is selling the flat she bought in Marbella in 2008. She paid 300,000 € for it then; now she is selling it for 280,000 €. At the meeting before the signing, the buyer's lawyer tells her that, in addition to the 3 % of Modelo 211 (the form the buyer uses to pay part of the price to the tax office on the seller's account), they are going to hold back another amount from the price to pay the plusvalía municipal. Hélène does not understand why the buyer is dealing with a tax she thought was hers, nor why she has to pay plusvalía if she is selling for less than she paid.
The seller is still the taxpayer; the buyer pays in her place
The tax on the increase in value of urban land, known in Spain as the plusvalía municipal, is a municipal tax. On sales it falls on the person who transfers: article 106.1.b of the consolidated text of the Ley de Haciendas Locales (the Local Finance Law) makes them the taxpayer. But section 2 of the same article adds that the person who acquires the land shall be treated as the taxpayer's substitute "when the taxpayer is an individual not resident in Spain".
In practice this means three things:
- The buyer is the one who files the return or self-assessment with the town hall and pays the tax.
- As the tax really belongs to the seller, the buyer deducts its amount from the price.
- The town hall goes after the buyer, not Hélène, if anything is left unpaid.
The deadline, where the local by-law does not set another system, is thirty working days from the sale for transfers between living persons, under article 110.2 of the same law.
Two ways of calculating it
Since the 2021 reform, the law offers two methods. The first, the objective one, multiplies the valor catastral of the land at the time of sale (the official value the Catastro, the land registry authority, gives each property) by a coefficient that depends on the years that have passed, with the maximums set by article 107.4 and specified by each town hall in its by-law. The municipal rate, also set by each town hall, is applied to that base. We give no figures for coefficients or rates because they vary by municipality and by year.
The second method takes the real increase in land value: the difference between the sale value and the purchase value, in the proportion that the land represents within the valor catastral. Article 107.5 allows the taxpayer to show that this real increase is lower than the objective base and, if so, to be taxed on the lower figure. The guide the two methods of calculating plusvalía compares them in detail.
Hélène's case: there may be no tax
Article 104.5 of the Ley de Haciendas Locales establishes that the tax does not apply when it is shown that there has been no increase in the value of the land. To check this, the land values at purchase and at sale are compared, taking in each case the higher of the value stated in the deed and the value checked by the authorities, and without counting costs or taxes.
Hélène's IBI bill (the annual municipal property tax) attributes 45 % of the valor catastral to the land. With that percentage:
- Land value at purchase: 45 % of 300,000 = 135,000 €.
- Land value at sale: 45 % of 280,000 = 126,000 €.
- Difference: −9,000 €. There is no increase.
- Consequence: the sale is not subject to the plusvalía municipal, provided this is declared and proved with the two deeds.
Had the flat been sold for 330,000 €, the real increase in land value would be 13,500 € (45 % of the 30,000 € difference). If the objective base calculated with the town hall's method turned out higher than that figure, Hélène, through the buyer, could choose to be taxed on the 13,500 €.
| Situation | Tax base | What has to be provided |
|---|---|---|
| Sale for less than was paid | The tax does not apply | A return and the deeds of purchase and sale |
| Real increase lower than the objective base | The real increase | The deeds and the calculation of the land proportion |
| Real increase higher than the objective base | The objective base | The ordinary return |
The land proportion comes from the IBI bill; how to read it is explained in the land value on the IBI bill.
The buyer, as substitute, has to file the return with the town hall together with the deeds to prove there was no increase. If he simply pays the ordinary assessment, the tax will have been overpaid and will have to be claimed back later. It is wise to agree in the deed who carries out that step and what happens to the amount held back if in the end there is no tax. We do not guarantee that the town hall will accept the valuation without argument.
How much to hold back and what to do with the difference
As the buyer is paying someone else's tax, he needs to hold money back before knowing the exact amount. The usual approach is to estimate it with the objective method and hold back that sum, or a little more. The deed should say what happens if the final tax is lower: the reasonable thing is for the buyer to return the difference to the seller as soon as he has the assessment.
In Hélène's case, if the sale is not subject to the tax, the amount held back for plusvalía should come back to her in full. If the buyer paid the ordinary assessment without proving non-liability, the way forward is an application for rectification to the town hall, which the guide claiming back an overpaid plusvalía explains step by step.
If you are still negotiating the sale, send us the draft contract and the IBI bill through the property sale form and we will review the clauses on amounts held back.
The plusvalía on Modelo 210
The plusvalía that the buyer finally pays on Hélène's behalf is a tax charged on the transfer. Article 35.2 of the IRPF Law (Spanish personal income tax), which applies through the reference in the IRNR Law (the law on non-resident income tax), allows taxes inherent in the transfer paid by the seller to be subtracted from the sale value. Although the buyer paid it in, Hélène bore it when it was deducted from the price, and that is how it should be shown, with the proof of payment. When the sale is not subject to the tax, there is nothing to subtract.
Hélène is selling at a loss, so her Modelo 210, the non-resident's tax return, will show zero tax and a refund of the full 3 %; the procedure is in selling at a loss: do I still have to file?.
Special cases
- Several sellers, some resident and some not. The buyer acts as substitute only for the non-resident seller's share. The resident declares their own share to the town hall as the taxpayer.
- The seller is a non-resident company. Article 106.2 speaks of a non-resident individual; the substitute mechanism does not extend to companies.
- The property was inherited. Acquisition by inheritance has its own plusvalía, paid by the heir, and the period over which the later sale's gain is generated starts on the date of death. We deal with it in the guide plusvalía on inheritances and gifts.
If there are two owners, each answers for their share; how the 3 % and the costs are split is in we are two owners: one return or two?.
Which papers the town hall asks for
Each town hall sets the specific procedure in its by-law, but article 110.3 of the Ley de Haciendas Locales requires the return to be accompanied by the document recording the acts that give rise to the tax, that is, the deed of sale. To prove non-liability or the real base, the deed of purchase is added, and it is also worth providing the IBI bill for the year of the sale, which gives the land proportion. If the buyer acts as substitute, he needs the seller to hand over those documents before the signing or on the day itself. Leaving it for later usually ends in an assessment by the objective method that then has to be disputed.
Coordinating the plusvalía with the buyer, the declaration of non-liability where it applies and how it is shown on Modelo 210 are part of the Salama Tax service for non-residents selling a property.