Tomás Rivera, who lives in Málaga, buys a house in Estepona in May 2026 from Gerald Hughes, a British man who lives in England and had owned it since 2009. Price: 480,000 €. At the notary's office he is told about the 3 % withholding for Hacienda (as the Spanish tax office is commonly called), and it is deducted from the payment. About the plusvalía municipal, the local tax on the increase in value of urban land, all he hears is that "the seller pays it, as always". In August he receives an assessment from the town council in his own name for 6,400 €. Gerald no longer answers his emails. Tomás has done nothing wrong; it is simply that nobody explained to him that the law made him responsible.
The substitute rule
In a sale, the taxpayer for the plusvalía is the seller, under article 106.1.b) of the consolidated text of the Local Government Finance Act (TRLRHL). But article 106.2 adds that the buyer is treated as the substitute taxpayer in place of the taxpayer when the latter is "an individual not resident in Spain".
Article 36.3 of the Ley General Tributaria (the General Tax Act) defines the substitute as the person who, because the law requires it and in place of the taxpayer, is obliged to meet the main obligation and the formal ones. The council does not have to go after Gerald first: it can go straight to Tomás.
This is different from who bears the economic cost. The same article 36.3 says that the substitute "may demand from the taxpayer the amount of the tax obligations paid". Tomás has the right to recover the 6,400 € from Gerald. The problem is a practical one: making a claim against someone who lives in another country, has no assets in Spain and has already been paid the price.
When it applies and when it does not
The substitution has precise limits:
| Seller | Buyer as substitute? | Who pays the council |
|---|---|---|
| Individual resident in Spain | No | The seller |
| Non-resident individual | Yes | The buyer, who can pass it on |
| Spanish or foreign company | No: art. 106.2 only mentions individuals | The selling company |
| Two sellers, one resident and one not | Only for the non-resident's share of the tax | Each for their own share, and the buyer for the non-resident's |
| Inheritance or gift to a non-resident | No: art. 106.2 only affects transfers for consideration | The heir or the recipient of the gift |
The residence that counts is tax residence, not nationality or the fact of holding an NIE (the foreigner's tax identification number). A British national registered on the padrón, the municipal register of inhabitants, in Estepona may be non-resident for tax purposes, and a Spaniard who lives in London is non-resident too. How to check it before signing is explained in the guide on checking the seller's residence.
The risk the buyer takes on without knowing
The 3 % withholding under article 25.2 of the Non-Residents' Income Tax Act is well known because the notary's office calculates it and it is deducted from the price. The plusvalía, by contrast, is assessed weeks or months later, when the price has already been paid. If the contract has not provided for anything, the buyer:
- is the person liable to the council;
- has to file the declaration within thirty working days of the deed, with the seller's details and title deeds;
- if he does not file and the council assesses the tax with the data the notary sends it, bears the surcharges or interest;
- can only recover the amount by claiming it from a seller who lives abroad.
How to work out what to hold back, step by step
The usual protection is to agree that the buyer holds back from the price an amount large enough to pay the plusvalía, or that it is deposited with the notary. To set it, the tax has to be estimated before signing. With the figures for the Estepona house:
- 2026 bill for the IBI (the annual council property tax): cadastral value of the land (the official value set by the Cadastre, Spain's property register for tax purposes) of 71,000 €; proportion of land to the total, 41 %.
- Years of ownership: 2009 to 2026, seventeen complete years.
- Objective base given by the council's simulator: 9,230 €.
- Actual increase: Gerald bought for 395,000 €. (480,000 − 395,000) × 0.41 = 34,850 €.
- The lower base is the objective one, 9,230 €. The tax resulting from the rate in the council's tax bylaw is about 2,770 €.
- Amount it makes sense to hold back: the estimated tax plus a margin in case the council uses other data. For example, 3,200 €.
The 6,400 € assessment that Tomás received does not match that estimate. It may be a mistake in the acquisition dates, in the percentage or in the cadastral value, or it may simply be that the council did not have the 2009 deed. He has one month to appeal, as we explain in can I appeal the assessment.
To prove that there was no increase or that the actual increase is lower, article 104.5 requires the title of acquisition to be provided. The seller has that document. If the buyer does not get it before signing, it may be very hard to obtain afterwards, and he will have to accept the objective method even if it works against him.
The substitute can also ask for the actual method
Article 104.5 says that the absence of an increase may be proved by "the persons or entities referred to in article 106", which includes the substitute. And article 107.5 speaks of "at the request of the taxpayer", a status the substitute has under article 36.1 of the General Tax Act. Tomás can therefore ask for the actual method to be applied, or for the sale to be declared not liable if the seller sold at a loss. For that he needs the seller's documents, which is why they should be requested before the price is paid.
What to agree in the deposit contract or in the deed
- A clause identifying the seller's tax residence and proving it with a certificate.
- Holding back an estimated amount for the plusvalía, in addition to the 3 % for Hacienda.
- An undertaking by the seller to hand over the purchase deed and the IBI bills.
- A rule for settling the difference between what was held back and the final tax.
- Who files the declaration with the council, and by what date.
An agreement like this, whether in the arras contract (the private deposit contract usually signed before completion in Spain) or in the deed, does not change who answers to the council, but it turns an international debt-collection risk into a simple settling of accounts between the parties. If you are about to buy from a non-resident, you can send us the draft contract and the IBI bill through the plusvalía form. We do not give an opinion on whether the clauses are valid in the seller's country: if a claim had to be brought there, a lawyer from that country would have to assess it.
What the plusvalía means for the seller
For Gerald, the plusvalía is a tax inherent in the transfer. If he bears it, either by paying it or because it was deducted from the price, he can subtract it from the sale value when he calculates his gain on Modelo 210, the non-resident income tax return, because the Non-Residents' Income Tax Act refers to the IRPF (Spanish personal income tax) rules. If Tomás paid it and never passed it on to him, Gerald did not bear it and cannot deduct it. The guide on a non-resident's sale, step by step sets out the seller's other obligations, and the question on who pays the municipal plusvalía if the seller is non-resident covers the deadlines and the coordination with the withholding.
The Salama Tax page on the municipal plusvalía explains how the tax is calculated and declared, also when a non-resident is involved.