BASQUE COUNTRY AND NAVARRE: Do you know how municipal capital gains tax is calculated?

When an urban property is transferred, the Tax on the Increase in Value of Urban Land (the "municipal capital gains tax") must be paid. For these purposes, there are two ways to calculate the tax:

Objective method

Objective parameters are used (cadastral value of the land, in general, and years of ownership). This is the method used by municipalities when collecting the tax.

Real method

The taxpayer can choose to calculate the tax based on the actual gain obtained in the sale. Therefore, if it is demonstrated that the actual capital gain is lower than the one resulting from the objective calculation method, the real gain can be applied.

Key points to consider

• Always verify which system is more advantageous for you to apply.
• Additionally, if the cadastral value of the land is significant, it may sometimes be interesting to advance or delay the sale, as the coefficient system can lead to a change in the tax amount if the number of years of ownership changes.
• And remember, you will not have to pay the tax if you can prove that there has been no increase in value (by the difference between the land value on the dates of transfer and acquisition).