N) Spanish Real Estate: VAT (IVA), Transfer Tax (ITP) and Stamp Duty (AJD)

Spain’s Real Estate market is appealing to many, thanks to its sunny climate and vibrant lifestyle. However, buying or selling property in Spain involves navigating specific tax regulations. It’s crucial to know when VAT (IVA) and transfer tax (ITP) apply to avoid surprises and ensure a smooth transaction.

Introduction

Spain’s Real Estate market has long attracted foreign buyers, drawn by the country’s pleasant climate, vibrant culture and relatively affordable property prices. However, buying or selling a property in Spain involves navigating various tax regulations that are crucial to understand. This blog provides an overview of when VAT (IVA) and Transfer Tax (ITP) apply, and how ACCOMPANY can assist you through these complex processes.


What You Need to Know

VAT (IVA – Impuesto sobre el Valor Añadido)

VAT is applicable on the first transfer of new Real Estate. This means that if you buy a new house from a developer or builder, you will have to pay VAT.

  • Rate: The standard VAT rate for residential properties in Spain is 10%. For social housing (VPO – Viviendas de Protección Oficial), a reduced rate of 4% may apply.
  • Application: VAT is only applicable on the first transfer of the property. For the sale of commercial properties or building land, the VAT rate can be 21%.

 

Transfer Tax (ITP – Impuesto sobre Transmisiones Patrimoniales)

Transfer tax is applicable on the second and subsequent transfers of Real Estate, meaning the sale of existing properties.

  • Rate: The rate for transfer tax varies by autonomous region and usually ranges between 6% and 10%.
  • Application: ITP is levied when a property is purchased from an individual (not a company) or on the second transfer of a property that was previously sold under VAT.

 

Specific Scenarios

  • New Property from a Developer: When purchasing a new property, you pay 10% VAT. Additionally, there are notary fees, registration fees, and stamp duties (Actos Jurídicos Documentados – AJD), which typically amount to around 1.5%, depending on the region.
  • Existing Property from an Individual: When purchasing an existing property, you pay Transfer Tax (ITP). The rate varies by region, for example, 10% in Andalusia and 6% in Madrid.
  • Commercial Property: The purchase of commercial property or building land falls under the standard VAT rate of 21%, unless it is a second transfer, in which case ITP applies.
  •  

    Other Important Considerations

    • Notary and Registration Fees: Besides VAT and ITP, you also need to consider notary and registration fees, which are usually borne by the buyer.
    • Stamp Duties (AJD): For new construction projects, stamp duties vary from 0.5% to 1.5%, depending on the region.

    How Can ACCOMPANY Help?

    Navigating the purchase or sale of Real Estate in Spain can be complex. ACCOMPANY is here to guide you through the process and ensure you comply with all legal and tax obligations.

    • Expertise in the Spanish Real Estate Market: ACCOMPANY has extensive experience and knowledge of the local Real Estate market and the associated regulations.
    • Legal Support: Our legal experts can advise you on the applicable taxes and help minimize your tax liabilities.
    • Comprehensive Guidance: From finding the right property to completing the purchase, ACCOMPANY supports you every step of the way.
    • Notary and Registration Services: We ensure all necessary documents are correctly drafted and submitted, ensuring a smooth transaction.
    • Assistance with Subsidies and Reduced Tax Rates: In some regions, there are subsidies or reduced tax rates available for certain groups of buyers. ACCOMPANY can help you determine if you qualify and assist with the application process.

    At ACCOMPANY, we understand that buying or selling a home in Spain is a significant step. Our goal is to make this process as straightforward and stress-free as possible, so you can enjoy your new property without any unexpected surprises.


    Conclusion

    Navigating the Spanish Real Estate market requires a thorough understanding of the various tax regulations that apply to the purchase and sale of property. Whether dealing with VAT for new constructions or Transfer Tax for existing homes, knowledge of these rules is essential. With the right guidance, such as that provided by ACCOMPANY, you can confidently enter the Spanish Real Estate market and enjoy your investment in this beautiful country. ACCOMPANY is dedicated to ensuring that your Real Estate transactions are handled smoothly and efficiently, allowing you to focus on the excitement of your new property adventure.

    info

    The information contained herein is of a general nature, and subject to changes. Applicability to your specific situation should be determined through consultation with our tax or legal advisors.