This post will provide you with an estimate of the taxation obligations that the acquisition and sale of properties in Spain are subject to.
The act of acquisition and sale is subject to tax settlements which vary according to the category of property acquired, therefore we can differentiate between:
PURCHASE OF A NEW BUILD PROPERTY
This scenario applies to cases in which the property is purchased directly from the property developer or builder, and is subject to two types of taxation:
- Value added tax (VAT), which will vary according to the type of property:
- 21% for garages and parking spaces, storage rooms and premises
- 4% for state subsidised dwellings
- 10% for dwellings
The VAT amount shall be handed over by the purchaser to the vendor at the time of the purchase, for payment to the Inland Revenue.
- Stamp Duty Tax. A taxation rate is applied to the property purchase price which varies in this case according to the region in which the purchase takes place. In the case of the Region of Valencia (Costa Blanca Alicante) the taxation rate is 1.5% applicable to the total purchase value.
Stamp Duty Tax is settled by the purchaser, In the Region of Valencia the payment should be made to the Regional Ministry of Finance, Inland Revenue and Employment within a maximum of thirty working days from the date of signing the deeds.
PURCHASE OF A USED OR SECOND HAND PROPERTY
In this scenario the purchase is subject to Property Transfer Tax. A taxation rate is applied to the value declared in the notarial deeds which varies according to the region in which the purchase takes place. In the case of the Region of Valencia (Costa Blanca Alicante) the taxation rate is 10% applicable to the total purchase value.
Expert advice.
For this taxation the Administration can carry out a check on the value declared in the sale, and in the case that it is inferior to the value proven, they can issue a complementary taxation settlement. Given the importance of this matter due to unexpected financial repercussion purchasers tend to encounter, we will deal with it in greater detail in our coming publications. This will be from two angles, one preventative with the aim of declaring the minimum values required by the Inland Revenue (as part of the conveyancing services provided by MSG Legal), and from perspective of a legal defence when facing verifications on purchase values by the Administration.
Property Transfer Tax is settled by the purchaser, In the Region of Valencia the payment should be made to the Regional Ministry of Finance, Inland Revenue and Employment within a maximum of thirty working days from the date of signing the deeds.
MUNICIPAL TAX ON INCREASE IN URBAN LAND VALUE (CAPITAL GAINS TAX)
This tax is of a municipal nature, and is payable directly to the District Council where the property is located.
The taxpayer required to pay this tax is always the vendor.
Capital gains tax is settled by the vendor. the payment should be made to the corresponding District Council within a maximum of thirty working days from the date of signing the deeds.
Expert advice.
The Spanish regulations, in particular the Royal Legislative Decree 1/2007, General Law on Consumer Protection, states that if the vendor of the property is a Property Developer (Professional), any clause agreed in the contract which transfers the payment obligation to the purchaser is considered abusive, and therefore void.
If the vendor of the property is resident in a foreign country, the law states that the taxpayer required to pay this tax is the purchaser. In this scenario it is advisable to make a retention of the equivalent amount of the capital gains tax applicable to the total purchase price.
The CONVEYENCING legal service provided by MSG LEGAL comprises control and management of all fiscal obligations throughout the process of acquisition or sale of the property.
