Taxes for the purchase and sale of rustic land in Spain

The purchase and sale of a non-developable property is a complex process, which can be lengthened in time for different reasons, such as the agreement of obligatory and/or additional payments. It seems obvious, but the first step is to fix a price, which it is advisable to obtain from an appraisal or cadastral valuation. It is also important to know the taxes for the purchase and sale of rural land that must be paid when buying and selling a rural plot. To do so, it is necessary to know that these costs can be direct or indirect.

This is a tricky issue, as it is often difficult to reach an agreement on the amounts that must be negotiated between both parties. Both buyers and sellers seek to avoid the additional outlays required by this procedure. Many of the expenses can be negotiated, except for some taxes, such as personal income tax or property tax, among others.


Taxation on the sale of rural land

  • Taxation for the increase or reduction of assets through the annual personal income tax return. Taxation for the increase or reduction of assets that must be made in the annual personal income tax return, in order to comply with the relevant taxation of the Inland Revenue. It is therefore essential to reflect whether or not there has been an increase in wealth, i.e. whether or not the property has been sold for a higher amount than it was acquired. Conversely, there may have been a reduction in wealth, by selling at a lower price than when purchased. All the details can be found in the Real Estate Tax Act.
  • Real Estate Tax (IBI) for the year in which the sale is made.


Taxes for the purchase of rustic land

  • The expenses generated by the registration of the deed in the relevant Land Registry.
  • The Transfer Tax (ITP), which must be paid by the buyer within 30 working days of signing the contract. This is, in principle, the only tax for the purchase of a rustic land as such, as the others are derived expenses.
  • Costs to be negotiated between both parties

There are a number of costs in the process of buying and selling a plot of undeveloped land, which are not covered by any regulations. Therefore, the buyer and seller have to come to an agreement to establish who bears them:

  • Management and processing of the dossier, which is normally paid by the person who hires the services of the manager. However, a half payment can be agreed or as the parties wish.
  • Other payments such as notary, lawyer, etc.

In relation to the costs between both parties, the most advisable thing to do is to formalise the negotiation before carrying out the procedure of the sale of the rural property. A disagreement or any confrontation with this issue can damage the whole commercial operation or put an end to it.


Tax when buying or selling rustic land in Spain


Tax exemptions on the purchase and sale of a non-development plot of land

  • Value Added Tax (VAT). Article 20 of this tax states that rustic land is exempt from the total payment of this tax, provided that the sale has taken place under the classification of non-developable land. Otherwise, the corresponding amount should be paid. To check the category of the land, you can go to the Town Hall of the municipality.
  • Capital Gains Tax or Tax on the Increase in Urban Land Value (IIVTNU). Included in the Ley Reguladora de las Haciendas Locales, where it is established that plots of rustic land do not belong to the classification of urban land, so they are not obliged to pay this tax. Therefore, it does not matter whether the undeveloped property has registered plusvalia or not.

Although there is no obligation, it is advisable to go to the Land Registry to check the status of the land, as its classification may have changed over the years since it was acquired.


Which properties are exempt from capital gains tax?

In general terms, the exemption from paying the capital gains tax are rural properties and houses located in the old city centres or in buildings of public and/or social interest, with artistic, cultural or historical value.


What are the differences between the cadastral value and the market value and how are they calculated?

Both offer the possibility to know the value of a property from different points of view, as well as its yield after the initial investment. There are major differences, but the most important one is that the cadastral value must be lower than the market value. In fact, many experts recommend that the difference should be around 50%.

Main differences between the two:

  • Different amounts

The market cost is subject to different variants such as the demand for the property, the economic situation, the location, the state of the land, etc. On the other hand, the cadastral valuation does not depend on any phenomenon and is based on a series of attributes of the property itself.

  • Financial aspect

The cadastral amount is the starting point from which the costs of taxes such as IBI, IRPF, ITP, IAE, IIVTNU or Plusvalía, etc. are obtained. On the other hand, the market price is calculated during the purchase process, after carrying out an appraisal of the plot of land, which is used to determine the amount for which the property should be sold. In this way, it is possible to deduce the profitability that the seller will obtain. It should be noted that the administration will verify whether the sale price exceeds the minimum price it considers relevant.

  • Valuation

The cadastral value is calculated by a group of professionals, who are responsible for defining the amount that will be fixed at the land registry office. The legislation stipulates how each property is to be assessed, depending on its technical aspects. Meanwhile, the market price is influenced by the area, the characteristics, size, location, municipality etc.


How are they calculated?

The precise deduction of the cadastral value and the correct assessment of the market value are two fundamental aspects for the purchase and sale of a property. The most important aspects involved in the calculation of both values are:

  • Cadastral value

Different elements influence the final value, among them: location, building costs, exploitation or activity to which it is destined, state, age, land, etc.

There are a series of tips for perfecting it, which leads to an optimisation of the cost of compulsory taxes. The first thing to do is to check that the cost of the cadastre does not exceed the market cost. In addition, it is necessary to corroborate the type of land and the history of the property.

  • Market value

In the end, the seller of the land is responsible for establishing the selling price, but it is advisable to do so with the help of a professional related to the real estate sector. If the amount set is attractive, it will attract the attention of more interested parties, but if it is too high, it may lose all the attraction of the property.

Normally, a price is usually set in accordance with the current market situation and the type of land being offered. For this, it is very important to study the real estate market and to count on the services of experts in valuation, in order to establish an amount that is the most adjusted to the economic reality of the moment.

We hope we have been able to clear up any doubts you may have regarding taxes for the purchase and sale of rural land.

If you are thinking of selling or buying rustic land on the Costa Blanca, contact Brassa Homes® - Expert estate agents on the Costa Blanca since 1979.


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