Investment approach
Plusvalía municipal: two calculation methods and when no tax is due
Since late 2021, plusvalía municipal can be calculated in two ways — from the cadastral value or from the actual gain — and you pay whichever is lower. If you sell at a loss, there is no tax.
When you sell a property, plusvalía municipal can be calculated by two methods — the objective method, based on the cadastral value of the land, and the real method, based on the actual increase in price — and you pay under whichever gives the lower figure. If the property sells for less than it was bought for, there is no tax at all.
Two methods instead of one formula
The choice arrived with the Real Decreto-ley 26/2021 reform. The tax's official name is Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana.
- Objective method. The cadastral value of the land is multiplied by a coefficient that depends on how long the property has been owned.
- Real method. (Sale price − purchase price) × the land's share of the property's total cadastral value.
Both formulas give the taxable base, not the tax itself. The taxpayer can take the lower of the two bases, and the municipality's tax rate is applied to it; by law that rate cannot exceed 30% (TRLRHL, Articles 107–108). The rate is the same under both methods, so the lower base also means the lower tax.
When there is no tax
If the property is sold at a loss, meaning the sale price is below the purchase price, no plusvalía municipal is charged: formally, the land has not gained in value. Transaction costs and taxes are left out of this comparison; only the purchase and sale prices are set against each other.
The absence of a gain has to be shown: the sale is still declared to the town hall, with the purchase and sale deeds attached.
This rule does not carry over to IRPF or IRNR, which work out the gain under their own rules. The acquisition cost includes the costs of buying and, if the property was let, is reduced by the depreciation, so a sale below the purchase price can sometimes still produce a taxable gain. And if the seller is a non-resident, the buyer withholds 3% of the price on account of IRNR in any case (more on this).
Who pays and by when
On a sale, the seller pays the tax. The exception is a seller who is an individual not resident in Spain. In that case the buyer is liable to the municipality as the substitute taxpayer, and the amount is usually withheld from the price.
The deadline for filing is 30 working days from the date of the sale. The town hall of the municipality where the property is located confirms the coefficients and rate that apply to it.
Plusvalía in DNPI's project exit calculation
In our exit calculation, plusvalía municipal is a line of its own, kept separate from IRPF/IRNR and the estate agent's commission. We calculate it by both methods and take the lower result. The other selling costs are covered in our article on the entry price.
Questions and answers
Does the taxpayer choose the method, or does the municipality apply one automatically?
It depends on the municipality. Some use the objective method by default, and if the real method works out cheaper you have to ask for it yourself. Check the procedure with the town hall where the property is located.
If the property was held for 20 years, will the plusvalía be higher?
Under the objective method the coefficient depends on the holding period and may rise with the number of years. But there is no universal rule for every municipality and every year: the final figure comes from a calculation using the coefficients in force at the time of the sale.