Madrid cuts tax burden on property buyers as promised

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The tax burden on property buyers in Madrid just got a bit lighter with the start of 2014.

Buying resale property in the Autonomous Region of Madrid now costs a bit less thanks to tax cuts on property purchases that came into force on the 1st of January.

The transfer tax on resale properties, known as the Impuesto Sobre Transmisiones de Bienes Inmuebles, or ITP for short, has been cut from 7pc to 6pc, and Stamp Duty, known as Actos Jurídicos Documentados (AJD), has gone from 1pc to 0.7pc.

The tax cuts will save the buyer of a resale property costing €200,000 an estimated €2,500, according to calculations by the Spanish daily El Mundo. In this case ITP will drop from €14,000 to €12,000, and AJD from €2,000 to €1,500.

Plans to cut taxes levied on property buyers were announced by the regional Government back in October 2014, as I reported here: Madrid to lower property transfer tax to 6pc in 2014. The regional government hopes that lower tax rates will increase the tax take through higher sales volumes.

Whilst Madrid has cut ITP from 7pc to 6pc, Catalonia and Valencia have increased ITP from 8pc to 10pc, creating a differential of 4pc in Madrid’s favour. It will be interesting the evolution of sales and the ITP tax take in these regions over the next year.

Comments

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One thought on “Madrid cuts tax burden on property buyers as promised”

  1. Mark

    The Autonomous region of Catalunya shoots itself in the foot again!

    Do these muppets not realise that increasing taxes is proven to actually reduce the amount of tax revenue received! Especially in Southern Europe… The mind boggles

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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.