Spain tax authority clarifies municipal tax deductions for inherited property

The Spanish Directorate General of Taxes (DGT) has clarified in a binding consultation (V0231-26) that municipal capital gains tax paid when inheriting a property can be used to reduce the taxable capital gains when that property is later sold.

While the tax is not refunded directly, it can be incorporated into the acquisition value of the property. This increase in the cost basis reduces the overall capital gain reported for Personal Income Tax (IRPF) purposes. Other deductible expenses may also include proportional portions of Inheritance and Gift Tax, as well as notary, registry, and professional advisory fees.