When selling a house, whether it is in Torrevieja or elsewhere, there are a number of taxes and expenses that the seller must take care of. Among them is the colloquially called the municipal surplus value, plusvalía in Spanish, also known as the Tax on the Increase in the Value of Land of Urban Nature (IIVTNU, because of its Spanish initials).
Put simply, the surplus value is a tax that is paid when there is a transfer of a property, since it assumes that real estate always goes up-market over time. Previously, there was no way to protest the payment of the tax, but fortunately, that has changed. It is a complex tax that has raised many questions and controversies, so if you’re thinking of selling your house in Torrevieja, you probably want to continue reading.
What is the surplus value?
As we have already mentioned, the surplus value taxes the increase in value of an urban land during the years that this has been the property of the seller. It is regulated in the Royal Legislative Decree 2/2004 of March 5, in articles 104 to 110, and in the Municipal Ordinances, since each municipality applies its own conditions for the tax, within what the law allows.
The tax is applied in situations of purchase, donation, inheritance, exchange, and usufruct, but it doesn’t apply to rustic properties, nor to certain situations that we will talk about later. In addition, the maximum time of possession of the property that is considered is 20 years.
How is the surplus value calculated in Torrevieja?
The first thing that must be ascertained to calculate the surplus value is the cadastral value of the land, which is a data that is found in the receipt of the IBI, or in the cadastre of the house. Make sure you look at it there, since the value of the land registry and the value of the property are not the same.
Once you have that number, you have to calculate the revaluation rate, which varies depending on the municipality in which you are. In Torrevieja, the following chart is used:
|1 to 5 years||3,7%|
|6 to 10 years||3,5%|
|11 to 15 years||3,2%|
|16 to 20 years||3,0%|
Depending on the number of years the property was owned, a percentage or another is used, and this is applied annually. That is, if you have had your home for 9 years, your revaluation rate would be:
9 x 3.5% = 31.5%.
It is important to bear in mind that the revaluation rate applies only up to 20 years, so even if you have been the owner of the property for 35 years, you will continue multiplying by 20.
Then the tax base is calculated, which is obtained by applying the revaluation rate to the cadastral value. Let’s imagine that the property value of this house you have had for 9 years is € 75,000. Then, your tax base would be:
75.000€ x 31,5 / 100 = 23.625€
From the taxable base we get the full fee, which is what would be paid in surplus value in the event that we did not receive any bonus. The full fee is calculated by applying the tax rate, which is decided by each municipality, and in the case of Torrevieja is 30%. According to the example we have set, the full fee would be:
23.625 x 30 / 100 = 7087.5 €
The last thing that is calculated are the bonuses, which depend a lot on the circumstances of the transmission of the land. In Torrevieja, the bonuses amount to a 50% discount on the full fee if it is an habitual residence inherited by descendants, ascendants or spouses, and 20% in any other case of inheritance.
Does it look like a complex calculation? Our recommendation is that you trust a professional (like our real estate agents) to help you foresee the possible expenses of selling your house, and to put the best price.
Who pays the surplus value tax in Torrevieja? When is it paid?
The surplus value tax is almost always paid, except on very rare occasions. These exemptions are reflected in article 105 of the aforementioned Royal Legislative Decree 2/2004 of March 5, and must be requested from the city hall by presenting an instance with documentation proving the transfer, and the reason for the exemption.
The person who must pay the surplus value, in legal terms, is called the taxpayer. In addition to making the payment, the taxpayer must also present the documents related to the transfer (either sale, inheritance or donation) before the municipality.
If the transfer is a sale, the taxpayer is the seller, and therefore, who must pay the tax. In the event that the seller is not a resident of Spain, a deduction must be made on the money obtained from the sale according to the calculation of the surplus value, in order to pay the tax when it is claimed.
Sometimes, both parties agree that the buyer will pay the tax, but if it is not paid, the administration will claim it from the seller.
If the transmission is an inheritance or a donation, the taxpayer is the receiver of the house, and therefore who must pay the surplus value. However, inheritances are generally subject to the aforementioned bonus.
What happens when you have sold at a loss?
You probably have noticed that the surplus value tax automatically assumes that the property has gone up-market, whether or not this is true. This is a law that made sense in times of the housing bubble, since almost everything was sold at surplus value, but today the situation is different.
If you have sold at a loss, you have up to four years to exercise your right to claim SUMA, which is the managing entity of the municipality of Torrevieja, to return the full amount, although it is advisable to initiate the process as soon as possible. For this you must provide evidence that you have sold at a loss, which once again works much better with the help of a professional.