Plusvalía tax on inheritances set to be next focus of public pressure for reform

The 'plusvalía' tax on property inheritances is causing controversy.
The 'plusvalía' tax on property inheritances is causing controversy. / SUR
  • The added value levy on property transactions is paid by the beneficiaries of estates when they inherit a home and is a big source of revenue for town halls

Last week politicians in Andalucía reached a deal to abolish regional inheritance tax from 2018 for children and spouses on estates under one million euros.

Despite the jubilation over this policy change after years of public campaigning, the move actually affects relatively few people, as most estates were already below the old threshold. However there is one tax paid by heirs on homes that is levied more often and some are beginning to ask if this is the next piece of taxation due for reform.

The plusvalía tax is collected by the local town hall, making up an important part of their revenue. Officially known as the tax on increased urban land values, (IIVTNU by its Spanish initials), it is paid by a seller on the increase in value of the land a property is on since it was last sold.

Recently a high court found against town halls that were still charging this tax (which is calculated on outdated rateable values) even when a property was sold at a loss.

The tax needs to be paid by heirs who inherit homes and can reach many thousands of euros even on the average property. Each municipality applies different rules, with some insisting that all heirs pay, while others offer big discounts for family members who have been sharing the home with the decreased.

So far local mayors have been reluctant to say if they will relax the conditions further, in line with the recent change in regional inheritance tax.