How much VAT do we pay when buying a home?
SAVINGS AND INVESTMENT I December 27, 2021
When buying a new home, the buyer must pay the corresponding amount of value added tax (Impuesto sobre el Valor Añadido, or IVA). We'll tell you how much you will be paying, depending on the type of property you are buying, and also what the situation is when it comes to second-hand properties.
The tax rate will vary, depending on the type of property we are buying. For instance, purchasing a new home is subject to a reduced VAT rate of 10% on the amount stated in the deed of purchase and sale. This 10% rate also applies to any parking spaces (up to a maximum of two) or annexes (such as a storage room) that are included in the sale of the property.
However, if we are buying a state-subsidised home (vivienda de protección oficial), the VAT falls to a super-reduced rate of 4%. And in the unlikely event that we are buying commercial premises to be used as a dwelling, then after obtaining the corresponding licences established by law, we will have to pay the general VAT rate of 21%.
The VAT payable on a new home will be charged directly to the seller, who will have to pay the tax to the Spanish tax office (AEAT) by filling in the corresponding self-assessment form. This process can be carried out in person at an AEAT office (and then taking the form to a collaborating bank to make payment), or on the website of the AEAT.
No VAT is payable when purchasing a second-hand property, as the tax is only levied the first time a property is sold. In this case, we will need to pay property transfer tax (Impuesto de Transmisiones Patrimoniales, or ITP), which is a percentage of the value of the purchase and sale and ranges from 6% to 10%, depending on the autonomous community.
In this case, the tax is payable by the purchaser of the property, who must present the self-assessment (form 600) at the tax office for the autonomous community in which the property is located, within 30 days of signing the deed of sale.
There are two special situations in which the buyer does not have to pay VAT when buying a property:
The payment of VAT or, as the case may be, property transfer tax is not the only cost that the buyer of a property will have to meet. They will also have to pay the fees of the notary's office where the deed is executed, along with the fees charged by the Land Registry and by the management agency if instructed to process the purchase and sale. And if we have arranged a mortgage to cover the cost of purchasing the property, then all the mortgage-related costs will need to be included as well.
In short, if you are thinking of buying a property, you need to be wary of all the additional costs above and beyond the actual cost of the property, such as taxes.
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