The Government has confirmed that VAT on new homes will go up from 4pc to 10pc at the start of next year.
Spain desperately needs to sell a glut of new homes, and nurse it’s battered construction industry back to health, so what does the Government do? The one thing most likely to achieve the opposite, namely raising the cost of buying new homes by increasing VAT from 4pc to 10pc, adding tens of thousands of Euros to the average new home purchase from the beginning of next year.
I wrote about this issue a couple of weeks ago, but at that stage it wasn’t clear if the Government was going to raise VAT on new homes or not, having raised it on pretty much everything else, including home refurbishment from 8pc to 10pc, ensuring that from now one everyone will pay for home refurbs in cash.
With both VAT and the tax on resales (ITP) going up, we might see a big comeback in under-the-table cash payments, also known as “B money”, after years of steady decline. Tax evasion is a national sport, and this Government is going to give it a big boost. I wouldn’t be surprised if they raise less tax as a consequence.
The Government has also gotten rid of mortgage tax relief on primary residencies, and according to analysis by Idealista.com, a property portal, the price of new primary residencies will have to fall an additional 10pc to 20pc if buyers are to avoid having to spend more money on a home purchase.
You can read more about the increase in VAT on new homes here: