Real Estate Spain - Main Taxes when you Purchase a Property in Spain
VAT or Property Transfer Tax
Which of these two taxes is levied will depend on what kind of property you are purchasing.
In general tems Impuesto sobre el Valor Anadido (Valued Added Tax) is levied on purchases of newly constructed property and land immediately available for construction. It will be charged at 7% of the purchase price. (Sometimes at 3% and others at 16%).
Impuesto sobre Transmisiones Patrimoniales is levied where IVA is not. ITP is charged at 6% of the purchase price.
In addition, when buying a newly built property 0.5% stamp duty will be payable.
Plus Valia Tax (Impuesto de plus valia)
As well as the property transfer taxes (IVA and Derechos Reales as referred to earlier) a capital gains tax is payable, known as Plus Valia, based upon the increase between the previous purchase price and the present sale price in the valuation of the property recorded in the Town Hall's index value of the price per swuare metre of the land. This is why we have previously advised that you should never agree to a lower figure being inserted in the Escritura than that which is actually being paid for the property because the Plus Valia tax is a tax on the gain between re-sale and the original price recorded in the Escritura.
Plus Valia tax applies theoretically and in practice to the seller, but in common practice it is often paid by the purchaser, because in default of payment (the tax is due about 6 months after the transaction) the authorities will look to the current owner of the property for settlement in any event, if the vendor has not paid the tax. If the words todos los gastos appear in the Purchase Contract it means that the purchaser is responsible for the payment of all taxes however arising in relation to that property, and this will include Plus Valia tax on a re-sale property.
This provision should be avoided if at all possible. The tax is on a progressive scale of 2% to 40% (usually 25%) depending on the amount of the increase in value of the property and the time lapse between the Escrituras. The increase in value can be adjusted downward if any improvements have taken place, since improvements do not attract Plus Valia tax.
As we have said the vendor usually seeks to pass on the tax to a purchaser unless the purchaser objects and excludes such a provision from the Contract.
The simplest and best way to ensure that the Vendor pays the Plus Valia is to agree with him in the contract that the tax will be deducted from the purchase price.
The purchaser can then pay the tax himself on demand. Many Vendors may not like this, but it is worthwhile to stand your ground if the plus valia tax is going to be not inconsequential.
In addition, even when the contract does eliminate Plus Valis from the buyer's obligations, the authorities will normally send notice of tax due to both buyer and seller and will look to the current owner recorded for payment, if the seller does not pay. However, if the officials ask you (as buyer/current owner) for payment, and your original contract specifically excluded the Plus Valia from your obligations, you have the right to take the case to court if necessary against the previous owner. In this case it would be necessary to prove that the property is completely paid for (except, of course, for the plus valia).
Another important point: even if the last sale of the property was recent and therefore no increased valuation is in the official index (which is changed every 2 to 3 years by the relevant Local Authority may nevertheless demand a Plus Valia payment of up to 10% of the tax charged on the last sale.
anyone purchasing property from a person or company who is not resident in Spain, must withhold 5% of the purchase price; this sum to be paid to the tax authorities on account of any liability of the vendors for Capital Gains Tax.
This does not apply in certain circumstances.
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