Spanish Tax Authority Rules Renovations Don’t Lower Base Price for Plusvalía Tax

If you’ve renovated your property and hoped those expenses would reduce your future local capital gains tax (plusvalía municipal), think again. Spain’s Dirección General de Tributos (DGT) has clarified that renovation costs cannot be added to the purchase price when determining the value increase for plusvalía tax purposes. 

What Does This Mean?

The DGT’s binding ruling—based on a taxpayer’s specific query regarding a €180,000 purchase followed immediately by €80,000 in renovations—affirms that only the original purchase price is used to assess whether a gain exists. Any renovation or improvement costs are not considered part of the acquisition value. 

In essence, the taxable base for plusvalía tax is determined strictly by comparing the acquisition price and the sale price of the property—not including expenses incurred in between.

What Is Plusvalía Municipal?

• Plusvalía municipal is a local tax levied on the increase in the value of urban land between purchase and sale. It’s different from national capital gains tax and calculated by municipal authorities.
• Taxpayers without value gain must prove the lack of increase using proper documentation—purchase and sale deeds—excluding renovation costs from their defense.

Why It Matters

• Renovations don’t reduce taxable land value—only the proprietary price counts.
• Even extensive improvements don’t qualify as deductible for plusvalía tax.
• If there’s no real gain on the land, you must still provide documentation to avoid the tax.

What You Can Do

• Keep clean records of both acquisition and sale prices.
• If structural changes were made solely on the building, you may still benefit indirectly—but not within the plusvalía tax calculation.
• Consult a tax professional to explore other deductible allowances (like in national capital gains) where renovations can provide relief.

How Taxadora Can Help

At Taxadora, we support property owners and non-residents by:

Final Thoughts

If you’re renovating a property in Spain, understand this: for municipal plusvalía purposes, improvements may not help reduce tax. Only the original acquisition price and sale price matter. Proper documentation remains key to proving no taxable gain exists.

Need help clarifying your tax liability? Visit our blog or get in touch with Taxadora today for expert guidance in property tax matters.