All the information on how the municipal capital gains tax will be calculated in 2021

When selling or inheriting a property, it is also necessary to take into account the calculation of the municipal capital gain. This is an amount that reflects the percentage increase in the value of the land where the property is located, and therefore depends on the Autonomous Community where the property is located.

Recently, on 26 October 2021, the Constitutional Court annulled the method used to calculate the taxable base of this tax. Since this November, a new way of calculating this tax, on which a large part of the income of local councils depends (after IBI), has been approved. Here we tell you how to do it.

Evolution of the capital gains tax

Since it was approved in 2004, the issue of how to calculate the municipal capital gains tax has been a hotly debated topic in the legal sector.

The first judicial setback occurred in 2017, where its application had been annulled in cases where the sale of the property produced a real loss of value of the property. Then, in 2019, there was another ruling against this tax where its application was annulled in cases where the amount to be paid was even higher than the effective capital gain.

And finally, on 9 November 2021, the Constitutional Court annulled this tax, considering its calculation method to be “unconstitutional”.

The new capital gains tax reform seeks to provide “legal certainty” to all taxpayers.

What you should know about municipal capital gains tax

Calculating the plusvalia municipal in real estate terms refers to the tax on the increase in value of urban land (which excludes all rural land).

This payment is made in the corresponding Town Halls, and it is important to bear in mind that:

• It is a tax that corresponds to the seller, although an agreement can be reached for it to be paid by the buyer, by means of a clause in the contract of sale.
• It is a value that has nothing to do with the net price of the property.
• In case of sale, it has a period of 30 days to be paid from the moment of the deed.
• It is only settled when the property is sold at a profit.
• The Royal Decree of 26 October states that this resolution has no retroactive effect.

The new methods and how they are calculated

Previously there was only one method for calculating the capital gain. It consisted of applying a coefficient to the cadastral value of the land, which only varied according to the number of years that had passed (up to 20 years) between the purchase of the property and its sale.

To this was applied a capital gains tax, which in the city of Barcelona is always 30%, regardless of the number of years of ownership of the property.

With the Royal Decree of 26 October, the Ministry of Finance has created two new methods for calculating capital gains tax:

• The objective system

Maximum annual coefficients have now been established to replace the coefficient according to the number of years of ownership of the property.

This coefficient is pre-fixed and is applied to the cadastral value of the land, which will be revised and updated every year according to the evolution of the real estate market.

It will be the task of each Town Hall to adapt the cadastral value to the real estate market, and they can choose to apply the maximum coefficient or a lower one.

And on this result, the corresponding percentage of the tax, which cannot exceed 30%, will be applied.

• Real Capital Gains

Individuals may choose this method if the difference between the sale price and the purchase price is less than the taxable base calculated under the objective system.

Can I choose the methods?

The great novelty now is that the payment of the capital gains tax will depend on each case. If the taxpayer proves that the actual capital gains method is the most beneficial method, he or she can apply to the local council.

Inheritance and capital gains tax

Calculating capital gains tax on inheritance has different features:

• It is related to inheritance tax.
• In some municipalities they apply rebates of up to 95%.
• When the property is inherited, it is paid according to the time during which the family member had it in their possession. And also, it is paid from the moment it is inherited until it is sold.
• They give 6 months with an extension of 6 more months, to liquidate before the Town Hall.
• If the property is inherited and sold in the same fiscal year, in theory this tax is paid only once, as the value of the land of the property has not changed during this period of time.

And in which cases is the municipal capital gains tax NOT payable?

There are exceptional cases in which this payment is not made, and that is when the owner has sold at a loss, and these cases have to be proven.

In any case, the exemption from payment of the capital gains tax in Barcelona is described on the website of the Barcelona City Council.

From Withfor, ethical real estate in Barcelona, we know that the calculation of the capital gain when selling or inheriting a property can be a long process and with some difficulty, so we invite you to contact us so that everything goes in the best way.

We want each of our clients to feel safe and accompanied in the process of selling or renting their property. That’s why we are committed to you every step of the way and keep you informed. Do you have a property for sale or rent? We are here to help you.