Plusvalía municipal: what it is and who pays it when you sell

What it actually taxes

The full name says it all: Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana. It doesn't tax the house, and it doesn't tax the profit from the sale: it taxes the rise in value of the urban land the house stands on, which surfaces when ownership changes hands. That's what Article 104.1 of the local finance law, the Ley Reguladora de las Haciendas Locales, says, and Article 104.2 adds that land classed as rústico (rural) for the purposes of IBI, the local property tax, isn't subject to it.

Since the Real Decreto-ley 26/2021, which brought the law into line with the Tribunal Constitucional's case law, there's a way out when the value hasn't risen: Article 104.5 excludes the tax "en las transmisiones de terrenos respecto de los cuales se constate la inexistencia de incremento de valor" (in transfers of land where there is shown to be no rise in value). It isn't automatic: the transfer has to be declared and the purchase and sale deeds produced.

Who pays it (and what changes with a non-resident seller)

In sales for consideration, the taxpayer is whoever transfers the land, that is, the seller (Article 106.1.b). In gifts and inheritances, it's the recipient who pays instead.

But there's Article 106.2: when the taxpayer is "una persona física no residente en España" (an individual not resident in Spain), the buyer becomes liable as a substitute taxpayer, and the council can claim the plusvalía from the buyer. That's why, when I'm buying for a client from an owner who lives outside Spain, I ask for the amount to be withheld at completion and paid to the council, and for the contract to say so in writing.

Careful not to confuse it with the national tax withholding. They're two different things that travel together: if the seller isn't tax-resident in Spain, the buyer withholds 3% of the price and pays it to the Agencia Tributaria, the Spanish tax agency, with form 211 (modelo 211), as a payment on account of the seller's tax. That's the non-residents' income tax; the plusvalía municipal is local, and it's paid to the town hall.

The two ways to work it out

After the 2021 reform, the taxable base can be worked out in two ways, and whichever comes out lower for the person paying is the one that applies.

• The objective method (Article 107.1): the cadastral value of the land (valor catastral) at the time of sale, multiplied by a coefficient tied to the years of ownership, over a maximum period of twenty years. Each council approves its own coefficients within the legal ceilings, updated every year: the figure has to be requested from the town hall, not guessed.
• The real-value method (Article 107.5): if the taxpayer shows, with the purchase and sale deeds, that the actual rise in the land's value is lower than the base worked out with the objective method, "se tomará como base imponible el importe de dicho incremento de valor" (that rise in value is taken as the taxable base instead).

The council's rate is then applied to the taxable base. Article 108.1 leaves it up to each council, "sin que dicho tipo pueda exceder del 30 por ciento" (provided that rate does not exceed 30 per cent): 30% is the legal ceiling, not the percentage you'll pay, and you need to read the council's own tax ordinance.

The deadlines, and what I do

1. Thirty working days For transfers between living people, so for a normal sale, Article 110.2 gives thirty working days (días hábiles) from the point the tax falls due to file the declaration with the council. For inheritances the deadline is six months, extendable to a year on request.
2. Declaration or self-assessment Many councils have adopted self-assessment, which the law allows under Article 110.4: you work it out and pay it yourself, within the same deadline. Article 110.7 then requires notaries to expressly warn whoever is signing about that deadline.
3. The estimate, before setting the price When I take on a house to sell, I ask the council for a plusvalía estimate, along with the latest IBI receipt: it's the only way to tell an owner how much will actually be left in their pocket.

This is general guidance on the national law: every council has its own tax ordinance, with its own coefficients, rate and procedures. It isn't tax advice: for your own case, speak to a professional qualified to practise in Spain.