Without an increase in value, there is no Plusvalía.

A decision by the Supreme Court of Catalonia in May 2012 could lead to changes in the calculation of the land appreciation tax (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana – also known as “plusvalía municipal”). This decision could be of interest to those who sell real estate at a loss or at least with little profit.

The plusvalía tax is levied in Spain on any transfer of rights to real estate and is collected by the respective municipality. It is irrelevant whether the transfer is based on a purchase contract, a gift, an inheritance, or any other legal transaction or whether the right transferred is ownership, usufruct, or any other right.

No appreciation, no plusvalía In principle, the plusvalía tax is intended to tax the increase in value of the property that occurred during the ownership of the transferor. However, the calculation of the plusvalía did not take into account whether the property had actually increased in value. Instead, the calculation of the appreciation is done fictitiously, and the legislature simply assumed that properties would always increase in value annually. Thus, for each year in which the transferred right was in the ownership of the transferor, a percentage of the so-called cadastral value of the property is used in the calculation. The result of this calculation constitutes the (fictitious) appreciation and the tax base of the land appreciation tax.

The Supreme Court of Catalonia had to decide on a case in which the plaintiff argued that his property had not appreciated in value during his ownership, but had instead lost value. Therefore, no tax could be levied on the (non-existent) appreciation.

The court sided with the plaintiff and ruled that the collection of the plusvalía tax requires a “real appreciation” to have accrued to the transferor. The legally prescribed fictitious calculation method for tax calculation cannot replace the requirement of a real appreciation. Otherwise, constitutional principles would be violated.

Taxpayers should therefore check whether the property has actually appreciated in value when calculating the plusvalía tax. If the property has lost value or if the real appreciation was lower than the fictitious appreciation calculated by law, this should be explained to the municipality.


Scroll to Top