The local Plusvalía tax levied on the sale of property
Letter from a reader
In 2018 we sold our villa in Calpe and paid all bills and moved on. At the time the “Plus Valia” tax had been stopped but would be started again! In November 2019 my husband was paying a bill at the Suma when they mentioned this tax so he paid up the amount they said. Before we moved we had enquired the amount we would have to pay and this was near about so we went ahead. A week ago we picked up from the bank some papers with a Suma bill one of which held an embargo on our account which the bank could not account for. So we went back to Suma and it was a Plusvalía bill for me plus nearly two hundred euros late payment fee. Even though we had had no knowledge it was due having paid in November we thought that was that.
Now it seems joint ownership means two payments!!! So is it the properties owners that are charged individually. Now we have found out the tax is illegal, in fact in Moraira it is not charged at all. And elsewhere the Suma offices declare this to be a voluntary payment by the owners and therefore not illegal. We unfortunately were four months over the due time of two years we might possibly have fought to get it back. If you are selling please be aware and check for yourselves.
The local Plusvalía tax, or to give it its full name the Tax on the Increase of Land of an Urban Nature, is a direct tax that charges the increase of the value of urban land after its transmission by any legal title or upon the constitution of any right of use or any right that limits ownership of the land. As such, rustic land, defined as land that does not pay rates (IBI) is not subject to this tax.
The figure of the local Plusvalía tax was the subject of a Constitutional Court judgement dated 11th May 2017 which on one hand confirms that the increase of the value of urban land may be taxed by the municipal Plusvalía tax but on the other hand annuls articles 107.1, 107.2 a) and 110.4 of the Law on Municipal Taxes and considers that they are unconstitutional insofar as they permit the local authorities to charge the Plusvalía tax even in situations in which a real increase in the value of the land has not arisen. To summarize, the judgement basically established that for the tax to be able to be charged, a real increase in the value of the land had to be demonstrated and if the vendor or person who transmits the land has not benefited from an increase in its value, the tax should not be charged.
As a result of the said judgement and the annulment of the articles referred to above, the local Town Halls could not issue any bills for the Plusvalía tax from 16th June 2017 as the annulment of the articles which justified the calculation of the Plusvalía tax meant that no rules existed regarding how the tax should be properly charged. Accordingly, many Town Halls simply froze the issue of the bills and the collection of the tax that previously would have been due.
To determine whether an increase in the value of the land has occurred, one has to compare the price of acquisition with the price of transmission and the previous regulation of the Plusvalía tax did not establish a mechanism of this nature to make the calculation of the tax. Now, anybody who is subject to Plusvalía tax may evidence whether an increase of the value of the land has occurred between the acquisition and transfer of the land, for example on the basis of the prices declared in the deed of purchase and deed of sale, and it is down to the Town Hall to challenge the inexistence of an increase in the value of the land by means of a duly justified valuation.
In your case, and if your property was in joint names, the sale of the property would have given rise to two potential Plusvalía bills, one for each of you as the owner of a share of the property which had been transmitted pursuant to article 35.4 of the General Tax Statute. It would seem that due to error, and obviously through no fault of yourselves, you were only provided initially with one of the bills which will almost certainly contain a reference to the percentage of ownership on the basis of which it was charged (i.e. 50% for example) and the second bill which you did not receive, gave rise to a procedure of embargo due to nonpayment.
Normally, after the transmission of property, the tax payer potentially subject to the Plusvalía tax must file a declaration regarding the transfer of the property with the necessary information for the authorities to issue a bill (if pertinent). The said declaration should be filed within a term of 30 working days from the date of the transfer of the property in the case of the sale of property. The Notary should always warn the sellers of property of these time limits and the consequences of a late, or lack, of filing of the paperwork with the local Town Hall or corresponding tax collection agency (e.g. SUMA in some cases).
If one will not actually made a capital gain as a result of the sale of property, it would be a good idea to seek professional guidance to ensure that the tax is not levied as a consequence of the sale of the property or alternately to make payment and claim back afterwards the payment made if it is considered that there is no basis for the tax to be charged due to the inexistence of a real increase in the value of the land transmitted.