What is the municipal capital gain and how to calculate it

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The municipal capital gain is a tax that has generated much controversy in recent years. And it is that this tax was taxed on all operations: with or without benefit. When the real estate market was in full "boom" we could say that most of the sales that were made generated a profit. But, until a few years ago, most people who wanted to sell a home apart from having a loss, had to pay this tax. For this reason, we want to explain to you what the municipal capital gain is and everything related to this tax.

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What is the municipal capital gain?

The tax on the increase in the value of urban land (IIVTNU) , popularly known as municipal capital gain , is a tax collected by municipalities when a house is donated, inherited or sold. This tax is levied on what has made the real estate more expensive from its purchase to the donation, inheritance or sale.

You already know what the municipal capital gain is, but… who should pay it?

Depending on the type of act that has been carried out, the person with the obligation to pay the municipal capital gain will be different.

  • In the case of the sale of a property , the seller will be who receives the money and, therefore, this will be the person who must pay the tax.
  • When inheriting a home, it will be the heirs who will be obliged to pay the municipal capital gain.
  • Finally, when it comes to a donation , the person who has received the home will be responsible for paying the tax.

How is this tax calculated?

Before calculating the municipal capital gain , you must know the cadastral value of the home and the time that has passed since the last act until that same property is sold, donated or inherited. To the cadastral value will be applied some rates of increase or revaluation of the property established by the town hall where the property is located. This rate may vary depending on the municipality where the property is located.



The figure will be multiplied by the years that the house has been maintained. From this calculation we will take the tax base on which the municipal capital gains tax is applied. On this tax base, the tax rate set by the city council is charged, which cannot be higher than 30%. The amount achieved with these calculations will be the amount that the subject will have to pay as a municipal capital gain.


Example to calculate a municipal capital gain

Let's see it with an example: In 2010 José bought an apartment but due to the current situation, he has decided to put it up for sale. The cadastral value of the property is 200,000 euros. First we calculate the revaluation rate that will be the calculation of multiplying 3 (figure set by the city council) by the years that the property has had, in this case 10 years.

This 30% will be applied to the property's cadastral value of 200,000 euros, resulting in a tax base of 60,000 euros. The tax rate should be attributed to the base, a figure that cannot be higher than 30% by law. Which, applying the maximum by law, we would have a tax of 18,000 euros. Remember that this tax will only be paid when the sale, inheritance or donation operation has generated profits.

When is this tax paid?

Until the ruling of the Constitutional Court in 2017, exposing the municipal capital gain unconstitutional when the house had not generated profits, this tax was always paid. In the 2018 ruling, the Supreme Court declared that this tax should only be paid in the event that there have been profits in the operation. That is, when the sale price of the property exceeds the purchase price.



The regularization of municipal capital gains

A bill has been announced in parliament that proposes some changes to regularize municipal capital gains. In this project it is maintained that the tax should only be paid when an equity gain is generated with the sale of the home and the method used to calculate the municipal capital gain. Of course, with an annual update of the coefficients that are applied by the city council. And that's not all, in addition this bill establishes that municipalities must return all capital gains collected from owners who sold their home at a loss.



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