When an inheritance includes urban property (a flat, a commercial unit, a plot of land), on top of Inheritance Tax there is another tax to settle that few people have heard of until they have to pay it: the municipal capital gains tax (plusvalía).
In this article
What exactly is it?
Its technical name is IIVTNU (Tax on the Increase in Value of Urban Land). In theory it taxes the increase in value of the land of the property from the time the deceased acquired it until it passes to the heirs. It is charged by the Town Council, not the national tax authority.
Who pays it and within what deadline?
In an inheritance it is paid by the heirs. The deadline is 6 months from the death (extendable to one year on request). It is settled at the town council where the property is located.
How it is calculated since 2021
Following the 2021 reform, you can choose whichever method works out cheaper for you:
- Objective method: a coefficient is applied to the cadastral value of the land according to the number of years elapsed.
- Real method: it is calculated on the increase in value actually obtained (the difference between the acquisition value and the transfer value of the land).
If the property has not gained value (or has lost value) since the deceased acquired it, there is no municipal capital gains tax to pay. You have to prove it with the deeds. Many heirs pay without knowing that they might owe nothing.
How to reduce it
- Always compare the two methods of calculation and choose the lower one.
- Check whether there has been a loss in value (in which case nothing is paid).
- Review municipal allowances: many town councils apply them for direct family members. In the city of Valencia, for deaths on or after 1 January 2024, descendants, ascendants and the spouse get a 95% allowance on any inherited property, whether or not it was the main residence.
General information. Each town council has its own bylaw; confirm the coefficients and allowances applicable in your municipality with a professional.