Municipal Plusvalia Tax. Liability of the buyer if the vendor is non tax resident in Spain.

Dear Lawyer,

A FEW months ago we bought a property on the Costa Blanca (Alicante).

The seller was a foreign gentleman who did not live in Spain, we went to the notary, paid and signed the deed of sale. Everything seemed to be correct, but a few weeks ago, we have received a notification from the Town Hall saying that we have to pay about €2,000 for the tax known as municipal plusvalia (plus value), because the seller left without paying it. Is that possible? Why did the notary not tell us anything?

Dear reader,

Thank you for your email.

First of all, we would like to explain that the local tax known as Municipal Plusvalia, is to be paid to the Town Hall where the property is located and the charge concerns the increase in the value of the property (only the part corresponding to actual land) taking into account the cadastral value, based on how long the property has been owned.

The notary would warn you in the deed you signed, about who is obligated to pay the tax and the need for payment, but it is not the duty of the notary to make sure that the tax is paid or that funds have been retained to do so.

In general, it must be said that the person liable for payment of this tax, when the property is sold, is the transferor or seller.

But, in the event that the seller is an individual classed as non-resident for tax in Spain, the law states that the purchaser or buyer is the substitute taxpayer and thus the administration is able to demand payment from the buyer directly.

This is established in the Local Administration law (Haciendas Locales) (2/2004) in its article 106, which states that the taxpayer, (that is, who must pay the tax), in principle, in the transfer of real estate will be the transferor, in this case, the seller. But in section 106.2 it says that when the transferor is a natural person (individual) not tax resident in Spain, the buyer will be considered a substitute taxpayer, and therefore will be obliged to pay.

Thus, although the general rule is that the person liable for the payment of the tax (known as municipal capital gain) which is referred to as: Tax on the Increase in the Value of Urban Land, is the seller, but the law itself establishes that when this is a physical person (that is to say, an individual and not a company) who is not a tax resident in Spain, the buyer is obligated to pay.

Therefore, in your case we must point out that:

1.-The Town Hall, as indicated, can correctly claim from you the payment of the municipal plusvalia or plus value tax, by virtue of article 106.2.

2.-You can however demand that the seller to pay it, or if you pay it, make a claim against the seller asking them to return to you the amount paid.

We advise all those who are purchasing a property in Spain that they ask for the advice of an expert lawyer, to try to avoid this type of problems, since the convenient thing in these cases, is to make an estimate of the possible Municipal capital gain or Plusvalia tax likely to be charged and make a retention of that amount from the total price payable to the selling party, to make sure of its payment.

If you want to buy or sell a property in Spain, we can advise and defend your interests. Contact us and we will help you.

The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.


Carlos Baos (Lawyer)

White & Baos

Tel:+34 966 426 185


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