What is the municipal capital gains tax
The municipal capital gains tax is the common name for the Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana (IIVTNU). It is a local tax on the increase in urban land value when a property is transferred, whether by sale, inheritance, donation or other means.
It is collected by town councils. Each municipality sets its own tax rate within the limits established by the Local Finance Law (consolidated text approved by RDL 2/2004). The tax is calculated exclusively on the cadastral value of the land, not on the total property value.
Who pays the capital gains tax
It depends on the type of transfer:
- Property sale: the seller pays. They are the one who has obtained (or not) the capital gain.
- Inheritance: the heirs or legatees who receive the property pay.
- Donation: the donee (the person receiving the property) pays.
In property sales, it is sometimes agreed that the buyer will pay. That agreement is valid between the parties, but as far as the town council is concerned the taxable person remains the seller. If the buyer does not pay, the council will claim from the seller.
Deadlines for filing and payment
The deadlines are strict:
- Sale and donation: 30 working days from the date of the deed.
- Inheritance: 6 months from the date of death, extendable by another 6 months if requested within the first 6.
Late filing incurs surcharges of 5% to 20% plus late payment interest. For inheritances, the extended 12-month deadline avoids many penalties, but the extension must be requested before the first 6 months expire.
Two calculation methods after RDL 26/2021
Until October 2021, the calculation was based solely on the cadastral value multiplied by certain coefficients. Constitutional Court ruling 182/2021 of 26 October declared that system unconstitutional because it taxed non-existent gains (properties that had lost value).
Royal Decree-Law 26/2021 of 8 November reformed the tax and introduced two calculation methods. The taxpayer may use whichever is more favourable:
Objective method (coefficients)
The cadastral land value is multiplied by a coefficient that depends on the number of years between acquisition and transfer. The maximum coefficients for 2024 (also in force for 2025 and 2026 until new ones are published) are:
- Less than 1 year: 0.14.
- 1 year: 0.13.
- 2 years: 0.15.
- 3 years: 0.16.
- 4 years: 0.17.
- 5 years: 0.17.
- 6 years: 0.16.
- 7 years: 0.12.
- 8 years: 0.10.
- 9 years: 0.09.
- 10 years: 0.08.
- 11 years: 0.08.
- 12 years: 0.08.
- 13 years: 0.08.
- 14 years: 0.10.
- 15 years: 0.12.
- 16 years: 0.16.
- 17 years: 0.20.
- 18 years: 0.26.
- 19 years: 0.36.
- 20 years or more: 0.45.
The tax base is: cadastral land value x coefficient. The municipality's tax rate (maximum 30%) is then applied to that base.
Direct estimation method (actual gain)
The difference between the transfer price and the acquisition price is calculated. That difference is multiplied by the percentage that the cadastral land value represents of the total cadastral value of the property.
Formula: (sale price - purchase price) x (cadastral land value / total cadastral value).
This method is more favourable when the property has risen little in price or when the land proportion is low relative to the total.
Calculation example
Consider a flat in Madrid with these figures:
- Purchased in 2012 for €180,000.
- Sold in 2026 for €250,000.
- Total cadastral value: €95,000.
- Cadastral land value: €42,000.
- Years elapsed: 14.
- Madrid City Council tax rate: 29%.
Objective method: €42,000 x 0.10 (coefficient for 14 years) = €4,200. Tax: €4,200 x 29% = €1,218.
Direct estimation method: actual gain = €250,000 - €180,000 = €70,000. Land proportion: €42,000 / €95,000 = 44.21%. Tax base: €70,000 x 44.21% = €30,947. Tax: €30,947 x 29% = €8,974.63.
In this case, the objective method (€1,218) is much more favourable than the direct method (€8,974.63). The taxpayer will choose the objective method.
If the property had been sold for €185,000 (a gain of only €5,000), the direct method would give: €5,000 x 44.21% = €2,210.50. Tax: €2,210.50 x 29% = €641.05. In that case the direct method would be better.
When you do not pay capital gains tax
Since ruling STC 182/2021, if there is no real increase in value, there is no taxable event. If you sell for less than you paid or for the same price, you can declare the transaction as not subject to the tax. You must still file the self-assessment (a zero declaration), providing the purchase and sale deeds as proof.
Transfers between spouses by divorce decree and contributions of assets to the marital partnership are also exempt.
Calculate your capital gains tax
Calculate your capital gains tax with our free calculator. Enter your purchase, sale and cadastral value data, and get the result using both methods so you can choose the most favourable.
If you are selling a property, process your property sale online with us. If you have inherited and need to settle the capital gains tax together with inheritance tax, see our inheritance service. For donations, we have a specific online donations service.