Municipal Capital Gains Tax in Galicia: Complete Guide for Sellers and Heirs

What is municipal capital gains tax and when does it apply

Municipal capital gains tax, formally known as the Tax on the Increase in Value of Urban Land (IIVTNU), is a local tax that levies the increase in value of urban land during the time a person has owned a property. It is managed and collected by the town hall where the property is located, not by the autonomous community or the State.

This tax is triggered in three main situations: the sale of a property, inheritance or donation of a property, and exchange or swap. In all cases, the taxpayer varies: in sales, the seller pays; in inheritances, the heirs; and in donations, the donee (the person receiving the property).

It is important to understand that municipal capital gains tax is independent of Income Tax (IRPF). Even if you sell your primary residence with no capital gain for IRPF purposes, you will still be obliged to pay municipal capital gains tax if the land value has increased during your ownership.

The two calculation methods after the Constitutional Court ruling

Constitutional Court ruling 182/2021 radically changed the landscape of this tax. Previously, the calculation was exclusively via the objective method, which often produced unfair results: tax was payable even when selling at a loss. The Constitutional Court declared this system unconstitutional.

The reform introduced a dual method allowing taxpayers to choose the most favourable option:

Method 1: Objective rule (traditional)

Calculated by multiplying the cadastral land value by a coefficient based on years of ownership (from 1.13 for one year up to 2.25 for 20 years) and then applying the municipal tax rate (between 26% and 30% in most Galician municipalities).

Method 2: Actual capital gain

Takes 50% of the difference between sale and purchase prices, then applies the municipal tax rate. Only applicable when there is a demonstrable actual gain.

Key tip: Always calculate both methods and choose the one resulting in less tax. In sales at a loss, Method 2 produces zero tax.

Tax rates in major Galician municipalities

The tax rate is set by each town hall within the legal range (26% to 36% for 2025). Below are current rates and estimated impact on a sample transaction.

Small municipalities on the Costa da Morte and in the Galician interior generally apply the minimum 26% rate, an advantage over larger cities.

Exemptions and rebates in Galicia

Several exemptions can reduce or eliminate the amount payable. It is essential to know them before any property transfer.

• Reinvestment in primary residence: If you sell your primary residence and reinvest in another within two years, you can claim exemption from the relevant town hall.
• Low-value transfers: When the resulting tax is below the municipal minimum (generally €20-50), some town halls do not require payment.
• Donations between direct family members: Some Galician municipalities offer rebates of up to 95% for transfers between parents and children or spouses.
• Officially protected housing (VPO): Certain municipalities apply 50% to 95% rebates for VPO within the first five years.
• Non-profit organisations: Transfers to NGOs and foundations are generally exempt in most Galician municipalities.

Important: Exemptions are not applied automatically. You must expressly request them when filing the self-assessment. Usual deadline: 30 working days from the transfer.

How to calculate capital gains tax step by step

Calculating this tax requires knowing the cadastral land value, years of ownership, the municipal tax rate, and optionally the purchase and sale prices.

1. Obtain the cadastral reference and land value from sedecatastro.gob.es. Land typically represents 40% to 70% of the total cadastral value.
2. Determine years of ownership from acquisition to transfer. Periods under one year are rounded up.
3. Calculate using the objective method: Cadastral land value × coefficient (official table) × municipal rate.
4. Calculate using the actual gain method: (Sale price - Purchase price) × 50% × municipal rate.
5. Compare both results and choose the lower one. If the actual gain method produces a negative result, the tax is zero.

Practical example: You bought an apartment in Corcubión in 2015 for €85,000 and sell it in 2025 for €120,000. Cadastral land value: €30,000. Ownership: 10 years.

• Objective method: €30,000 × 1.65 × 26% = €3,346
• Actual gain method: (€120,000 - €85,000) × 50% × 26% = €4,550
• Result: You pay €3,346 (objective method is more favourable)

Capital gains in inheritances: Galician particularities

In inheritances, the heirs pay the capital gains tax, not the deceased. This surprises many families who discover they owe this tax in addition to Inheritance Tax. In Galicia, the combination can represent a significant burden.

Galicia applies rebates on Inheritance Tax for groups I and II (descendants and spouses) reaching 99% for taxable bases below €100,000. However, municipal capital gains tax does not have these regional rebates as it is a local tax. Each town hall sets its own rules.

The value to consider in inheritances is the market value on the date of death. The ownership period counts from when the deceased acquired the property until the date of death, not the date of acceptance of the inheritance.

Note: If several heirs share a property, each pays their proportional share. If an heir renounces the inheritance, they do not pay capital gains on that portion.

How to appeal an unfair capital gains tax assessment

If you believe the assessment is incorrect, you have the right to appeal. After the Constitutional Court ruling, appeals have a higher success rate when properly argued.

1. Claim to the town hall: Mandatory first step. Deadline: 30 working days from notification. Provide documentation proving no actual value increase occurred.
2. Appeal for reversal: If the initial claim is rejected, file with the same body within 30 days.
3. Administrative litigation appeal: If the reversal is also rejected, go to the administrative litigation court. This judicial route has the most success for claims based on the Constitutional Court ruling.
4. Request ex officio refund: If you already paid under the old system (before 2021) and can demonstrate no actual gain, you can request a refund within four years of payment.

It is advisable to hire a lawyer specialising in local tax law. The cost (€500-1,500) usually pays off when the assessed tax exceeds €2,000.

Conclusions and practical recommendations

Municipal capital gains tax is unavoidable in virtually any property transfer, but with the right information its impact can be minimised. Always calculate both methods, request available exemptions, and do not hesitate to appeal if the result seems unfair.

At Casas Galiza, we work with trusted tax professionals who can help you calculate and optimise capital gains tax for any transaction on the Costa da Morte and surroundings. Contact us for a personalised consultation.