Guide to Business in Spain logo

3Local taxes

3.2 Other taxes

3.2.1 Tax on erection and installation projects and construction work

This tax is levied on the actual cost of any work or construction activity that requires prior municipal permission, excluding VAT and any similar taxes.

The tax rate will be set by each municipal council up to a top rate of 4%, and the tax falls due at the start of the project regardless of whether the permit has been obtained.

3.2.2 Tax on increase in urban land value

This tax is levied on the increase disclosed in the value of urban land whenever land is transferred.

  • Taxpayer: In transfers for consideration, the transferor, and in donations, the transferee.
  • Tax rate: The rate set by each municipal council and capped at 30%.
  • Tax base50: The increase in the value of the land. The tax base is determined by reference to the value of the land when the tax falls due, which in the transfer of land will be the value that has been determined for the purposes of property tax. Certain annual percentages will be applied to this value based on the ownership period, which will be determined by each municipal council, and may not be higher than certain limits. In any case, if the taxpayer proves that the amount of the value increase is lower than the tax base determined as stated above, the amount of that value increase shall be taken as the tax base.

This tax is deductible for personal income tax purposes from the transfer value of real estate.

50The rules for determining the tax base were amended by Royal Decree-law 26/2021, of November 8, 2021, for the taxable events accruing after November 9, 2021, as a result of the Constitutional Court judgment 59/2017, of May 11, 2017, whereby the Constitutional Court declared the previous legislative regulation unconstitutional. In any case, that Royal Decree-law has been contested and is currently the subject-matter of an appeal for a ruling of unconstitutionality.