UPDATED: 18th February 2021
Plus Valia is a tax imposed by the local Town Hall (Ayuntamiento) upon the sale of a property. Broadly speaking, it is a tax on the notional increase in value of the relevant plot of land. The formula used to calculate the tax is based on the Catastral value of the property, from which the annual IBI Property Council Tax is also calculated.
The calculation varies depending on the local borough, the type and size of the property and the number of years since it was last sold. In the tourist areas, the tax typically comes in between 1,500€ and €4,000, although we have seen examples above or below this.
NOTE: This tax is legally payable by the SELLER, not the buyer. Historically, many sellers have tried to fob the tax off onto the buyer (either through buyer ignorance, or through negotiating strength during previous sellers’ markets). Nowadays however, the seller is routinely expected to pay this tax.
The Notary will typically write into the property title deed (escritura) who is responsible for paying this tax. Sometimes a retention amount is taken by the buyer upon completion to pay the tax on behalf of the seller. This is more common with non-resident sellers, particularly those who have demonstrated a propensity for not paying other debts on the property! Even where the seller is clearly responsible, some cheeky Town Halls will quite happily send legal demands for unpaid Plus Valia to the new owner, hoping that there is more chance of getting the tax out of the new owner than from a non-resident seller who has probably packed up and left the country.
RECENT COURT CASES AND CHANGES TO PLUS VALIA IN 2017
On 11th May 2017 the Canarian Supreme Court issued a ruling following a legal challenge brought against a charge for Plus Valia where the value of the property in question had fallen between the previous date of purchase and the later date of sale. The Court ruled that since Plus Valia is a tax on an increase in the land, there should be no tax to pay where the land has clearly decreased in value since the seller originally purchased it. The full Judgment in Spanish can be accessed here:
Needless to say, many properties have been sold at a loss throughout Spain since the economic crisis took hold in 2008. Under the ruling, affected owners can now make a claim against their Town Hall for a refund of the tax due where they sold a property for less than they bought it for. However, as the period for claiming or challenging tax calculations is 4 years from the date when the tax was payable, claims can only be made retrospectively up to 4 years ago, which at the time of the ruling, limited such claims to taxes paid in or after June 2013.
At the time of writing, most Town Halls were perhaps unsurprisingly dragging their heels in implementing the change and most still appear to be issuing tax bills where properties have clearly sold for a loss. In response, the government is anticipated to publish a decree clarifying the position. In the meantime, sellers should continue to request a Plus Valia calculation as normal, but then where the property has sold for a loss, they have every right to refuse to pay the assessed figure. Instead, they should challenge the calculation in writing through their lawyer or accountant and then wait for a response.
It is anticipated that some Town Halls will try to discourage or slow down the said challenges by insisting on evidence in support of the property devaluation, perhaps by demanding a costly expert’s valuation. On a strict legal analysis, disclosure of the sale escritura (title deed of sale) should be sufficient legal evidence in the first instance. However, it is fairly predictable that the Town Halls will seek to complicate or discourage claims wherever possible.
Meanwhile, anybody now selling a property who can demonstrate they have NOT made a capital gain over the original purchase price they paid, is NOT required to pay Plus Valia. Whilst Town Halls will suggest that it must be paid upfront and then reclaimed, this is FALSE. The correct procedure is to request the Plus Valia estimate as usual AFTER completing a sale at the notary. Then, when the tax estimate comes back, a written objection should be filed stating that the seller refuses to pay the tax on the basis that no gain has been made. If the seller has evidence in support (e.g. an official valuation), then that should also be submitted at this time. Tenerife Solicitors advise us that of several they have filed on that basis in both Arona, Adeje and San Miguel, all appear to have been placed on the shelf and the seller has heard nothing further from those Town Halls to date. However, the Town Halls are legally entitled to come back within 4 and a half years and require additional evidence that no gain has been made.
UPDATE ON COURT CASES: 18th February 2021
Various Plus Valia reclaim cases have now proceeded to trial. Whilst many claims are successful, it appears that where the tax was paid BEFORE the date of the above Constitutional Court ruling in May 2017, such claims are being rejected by a number of Judges. The reason typically given is that those Judges are refusing to interpret the Constitutional Court’s ruling as applying RETROSPECTIVELY. In other words, Plus Valia Payments made before May 2017 are not recoverable, as they were paid BEFORE the new court ruling came into effect. In our view, this is highly illogical, considering that the Plus Valia payment that the Constitutional Court ruled was illegal, was paid back in 2014. However, as the Constitutional Court’s ruling does not order respectrospective effect, any subsequent Judge has discretion to refuse to apply that Judgment retrospectively.
In conclusion, it would appear that any claim for a Plus Valia refund where the tax was paid before May 2017 is highly likely to be rejected, whereas latter tax payments more clearly fall within the remit of the Constitutional Court’s 2017 ruling.