How to calculate the new Municipal Capital Gains in Madrid

The new methodology for calculating the Tax on the Increase in Value of Urban Land (IIVTNU) is already active. This is how we announced it in one of our latest articles: Municipal Capital Gains: The new calculation methodology comes into force. A new system you should be aware of if you intend to sell, inherit or donate a property.

At KM2 Real estate Services we want you to have all the detailed information. That is why we have prepared a practical case so that you know how to calculate the new Municipal Capital Gains in Madrid, both with the objective method and with the real method.

Capital Gains in Madrid: how to calculate

Objective method

Let’s suppose that 15 years ago we bought a house in Madrid, whose cadastral value of the land was €200,000.

To calculate the Municipal Capital Gains in Madrid with the objective method, the tax base and the tax rate must be taken into account.

1. To obtain the tax base, it will be necessary to apply the corresponding multiplication coefficient based on the years elapsed between the transmission and the acquisition of the property (see table).

In our case, the tax base would be obtained by multiplying €200,000 x 0.12 = €24,000

2. Finally, we will apply the tax rate set by the City Council of the Community of Madrid, which is 29%.

Therefore, the tax rate would be calculated as follows: €24,000 x 29% = €6,960

The Municipal Capital Gains fee would amount to: €6,960

Real method

To calculate the Municipal Capital Gains in Madrid with the real method, the taxpayer’s capital gain will be taken into account. The following steps must be carried out:

1. Calculate the capital gain, subtracting the transmission price from the acquisition price.

Continuing with the same example as before, let’s say that the house we bought 15 years ago for €200,000 is now being sold for €250,000. Thus, the capital gain would be €50,000.

2. Know the percentage that the cadastral value of the land represents over the total value of the property.

Suppose it is approximately 40%.

3. Calculate the tax base by multiplying the profit by the previous percentage.

Tax base = 50.000€ x 40% = 20.000

4. Apply the tax rate of the Madrid City Council.

Tax rate = 20,000 x 29% = €5,800

The Municipal Capital Gains fee would amount to: €5,800

In this hypothetical case, it would be more beneficial for the taxpayer to go for the Real Capital Gains since the amount to be paid would be €5,900 compared to the €6,960 from the Objective Capital Gains.

If you are thinking of selling an apartment in Madrid and need advice, at KM2 Real Estate Services we will be happy to help you.

You are just one step away from selling your home in a professional and profitable way!