We commonly know the strict concept of capital gains as the Tax Increase in Value of Urban Land; yet, by this means it is just another direct tax, within instant, municipal accrual and voluntary establishment by town halls, who are entirely responsible for the management of this issue.
But very often, the following question is stated; who should pay this local capital gains?
In terms of property sales, the paying side, is the seller, but in the case that the seller is not a Spanish resident, the purchaser becomes responsible for the payment of the tax; and in case of inheritance or donation, the responsibility relies on the new owner.
Furthermore, it is interesting to bare in mind that, municipal capital gains are to be considered local taxes, so it is up to each town hall to determine the most appropriate way to proceed. Even so, to make a general estimation, we shall consider the value of the land for the purposes of IBI, that is, the rateable value on the date of transmission. To this value, it will apply an annual percentage determined as stated by the City hall and multiplied, in turn, by the number of years they have kept the owned land, within a maximum of 20 years.
To the result obtained, the tax rate will be applied, which shall all be determined by the same organ, but may not exceed a 30%.
As for terms, it comes to 30 working days after transmission, except in the case of inheritance, where the term is 6 months, renewable up to one year by specific request.
It is important to mention that, optionally, and just in case the Town hall regulates so, a 95% of the total tax liability in the event of transfers on death in favour of the descendants, spouses or ascendants could be applied.
Now, is it possible to avoid this tax? how could individuals or enterprises to so?
Mostly, it is recommended is to pay the tax and then claim it back, provided that the amount claimed is more than 5,000 euros. Actually, specialists’ often advise, is the amount to be considered to compensate the action should be between 5.000 and 20.000 euros, since the need to invest in a technical proof that the sale has not generated profits, as in a barrister and solicitor; and although it is highly probable that you will get the amount back, there is always a margin of error that may otherwise occur.
For your concern, or if you need any advice on this matter, our multidisciplinary law firm Daemi Zabalza & Associates, will provide you with the best solutions on this kind of issue solving.