Tax on land value
Introduction
The Tax on the Increase in Value of Urban Land (IIVTNU), also known as municipal capital gains or arbitrium of capital gains, is a tax included in the local tax system of Spain, regulated in Royal Legislative Decree 2/2004, of March 5.[1] It taxes the increase in value of urban land revealed at the time of transfer.
The Constitutional Court, in a ruling of October 26, 2021, declared the nullity of certain articles of the tax law motivated by the method used to calculate the tax base, which makes its application unfeasible, with the original wording.[2] The ruling is the third handed down by this court since 2017 on this tax. The ruling of May 11, 2017[3] already declared some articles of the tax unconstitutional and void, to the extent that they subject situations of non-existence of increases in value to taxation.
Background
Traditionally called Arbitrio de Plusvalía, or municipal capital gains, unlike some of the other local taxes, it was not introduced by the current Law regulating Local Treasury, but rather has a long tradition in the Spanish tax system as a local tax.
The first time that a tax of this nature was regulated was in 1919. The tax was configured as a local, autonomous and ordinary tax, which taxed the capital gains or increases in value produced by the land during the period of ownership by natural and legal persons, taking two forms:
The current Local Treasury Law introduced a Tax on the Increase in Value of Urban Land of a similar nature and name to the previous one, but important new features were introduced. The general characteristics of this type of local taxes were maintained, which have been configured as direct, real, objective and instantaneous taxes, which fall on the real estate income that is obtained in an extraordinary way at the time of making a transfer.
Characteristics
The fundamental characteristics of this tax are:
Taxable event
The tax is levied on the increase in value experienced by urban land that is evident as a result of: