In addition, there is the obligation to pay to the local Town Hall, the Tax on the Increase in Urban Land Value (known commonly as the Plusvalia Municipal).
In order to calculate the amount of this tax, the catastral value of the property when it is purchased is taken as a reference point, and this is multiplied by the number of years that have transpired since the prior purchase, and a percentage coefficient that is determined by each Town Hall locally.
It is worth noting that nowadays this tax is somewhat questionable given that it no longer reflects any real profit or loss incurred as a result of the purchase and sale of a property but rather the assessed ‘increase’ in value according to the Town Halls’ own particular mathematical rules.
It is for this reason that in recent months some Courts have expressed opposition to the interpretation of the law by the Town Halls, considering that in order for the Plusvalía tax to be payable, it is necessary for there to exist a real increase in the value of the property.
In any case, if you are selling a property at a loss, do not fail to pay the tax that will be demanded by the Town Hall, but rather consider the possibility of appealing the tax following advice from your lawyer.
We shall provide more information on legal challenges of this type in a later article.