degravacion ends, VAT on reformas up from 8% to 21%!

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This topic contains 32 replies, has 11 voices, and was last updated by Profile photo of Anonymous Anonymous 4 years, 4 months ago.

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  • #56925
    Profile photo of Chopera
    Chopera
    Participant

    Thought it deserved its own thread, in case people missed it.

    The huge increase on VAT from 8% to 21% for reforming a property might be of interest to non-Spaniards thinking of doing up a property (the Spanish will of course “exempt” themselves by paying 100% cash)

    The desgravacion caused prices to hold up a bit just before the last time they got rid of it. Currently couples can get an income tax rebate of up to about €3000/year for paying down their mortgage. That will no longer be the case on property bought after this year.

    Along with the other austerity measures I reckon this will knock at least an extra 10% off Spanish house prices over the next year (that’s on top of the 15% I reckon they’ll fall by anyway). Expat properties o the costas may not be so affected, especially considering the rapidly weakening euro.

    (just my guess – I’m no expert)

  • #110515
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    That’s very interesting and important, thanks Chopera.
    I imagine it will at least give a temporary boost to small building companies, if the measure comes into play at the end of the year (correct me if I’ve read you wrong, not sure about the implementation date)
    But it will mean that from next year properties needing reforms will lose value because of the extra cost now involved in refurbishment work?

  • #110815
    Profile photo of DBMarcos99
    DBMarcos99
    Participant

    That’s very interesting and important, thanks Chopera.
    I imagine it will at least give a temporary boost to small building companies, if the measure comes into play at the end of the year (correct me if I’ve read you wrong, not sure about the implementation date)
    But it will mean that from next year properties needing reforms will lose value because of the extra cost now involved in refurbishment work?

  • #110516
    Profile photo of katy
    katy
    Spectator

    A lot of things are getting pushed into the higher VAT rate. Glasses go from 8% to 20% so people best get them before 1st Sept!

  • #110816
    Profile photo of katy
    katy
    Spectator

    A lot of things are getting pushed into the higher VAT rate. Glasses go from 8% to 20% so people best get them before 1st Sept!

  • #110517
    Profile photo of Anonymous
    Anonymous
    Participant

    Everyone will pay in cash. It’s that simple.

    As I understand it there is also a risk that the Government will allow the super-reduced rate on new homes to expire, pushing up VAT on new homes from 4pc now to 10pc next year.

    That would put the cost of a new home with a price tag of €200k up by €12,000. Ouch.

    Expect B-money to come back with a vengeance.

    http://www.spanishpropertyinsight.com/buff/2012/07/13/what-happens-if-government-lets-the-vat-reduction-on-new-homes-expire/

  • #110817
    Profile photo of Anonymous
    Anonymous
    Participant

    Everyone will pay in cash. It’s that simple.

    As I understand it there is also a risk that the Government will allow the super-reduced rate on new homes to expire, pushing up VAT on new homes from 4pc now to 10pc next year.

    That would put the cost of a new home with a price tag of €200k up by €12,000. Ouch.

    Expect B-money to come back with a vengeance.

    http://www.spanishpropertyinsight.com/buff/2012/07/13/what-happens-if-government-lets-the-vat-reduction-on-new-homes-expire/

  • #110521
    Profile photo of GarySFBCN
    GarySFBCN
    Participant

    I am ignorant about all of this. A few questions:

    1. How does this affect purchase of not-new home in August?
    2. When does the VAT increase for reforma begin?

    Thanks!

  • #110821
    Profile photo of GarySFBCN
    GarySFBCN
    Participant

    I am ignorant about all of this. A few questions:

    1. How does this affect purchase of not-new home in August?
    2. When does the VAT increase for reforma begin?

    Thanks!

  • #110522
    Profile photo of logan
    logan
    Participant

    New IVA rates of 21% begin on 1st September 2012.

  • #110822
    Profile photo of logan
    logan
    Participant

    New IVA rates of 21% begin on 1st September 2012.

  • #110524
    Profile photo of Chopera
    Chopera
    Participant

    @garysfbcn wrote:

    I am ignorant about all of this. A few questions:

    1. How does this affect purchase of not-new home in August?
    2. When does the VAT increase for reforma begin?

    Thanks!

    1) If you purchase before the end of the year and pay income tax in Spain then you will still be able to claim some income tax back each year on your mortgage repayments. I think the limit is €9000 per person per year. That is, if you pay off €9000 of your mortgage each year you will get a tax rebate for €9000 of your declared income. For each person this works out at about €1500 (it depends on their tax band) so for 2 working people owning a house together, they can pay off €18000 of their mortgage each year between them and get about €3000 back from the tax man.

    2) As Logan says, 1st September for VAT increases, as Mark says, most Spaniards will simply pay cash to avoid paying all or part of this tax.

  • #110824
    Profile photo of Chopera
    Chopera
    Participant

    @garysfbcn wrote:

    I am ignorant about all of this. A few questions:

    1. How does this affect purchase of not-new home in August?
    2. When does the VAT increase for reforma begin?

    Thanks!

    1) If you purchase before the end of the year and pay income tax in Spain then you will still be able to claim some income tax back each year on your mortgage repayments. I think the limit is €9000 per person per year. That is, if you pay off €9000 of your mortgage each year you will get a tax rebate for €9000 of your declared income. For each person this works out at about €1500 (it depends on their tax band) so for 2 working people owning a house together, they can pay off €18000 of their mortgage each year between them and get about €3000 back from the tax man.

    2) As Logan says, 1st September for VAT increases, as Mark says, most Spaniards will simply pay cash to avoid paying all or part of this tax.

  • #110526
    Profile photo of Anonymous
    Anonymous
    Participant

    Glasses/lenses go to 10% not 21% 😳 😳 ; also, any mortgage holder (tax payer) will not be able to get a tax break anymore from 2013; not JUST new homebuyers 😉 😉 ………. this will affect purchases of new homes and also spending power of existing owners … 😯 😯

    vat on building and reformas goes to 21% – BLACK money back in fashion; did it ever go away?? 😆 😆 😆

  • #110826
    Profile photo of Anonymous
    Anonymous
    Participant

    Glasses/lenses go to 10% not 21% 😳 😳 ; also, any mortgage holder (tax payer) will not be able to get a tax break anymore from 2013; not JUST new homebuyers 😉 😉 ………. this will affect purchases of new homes and also spending power of existing owners … 😯 😯

    vat on building and reformas goes to 21% – BLACK money back in fashion; did it ever go away?? 😆 😆 😆

  • #110528
    Profile photo of katy
    katy
    Spectator

    @UBEDA wrote:

    Glasses/lenses go to 10% not 21% 😳 😳 ; also, any mortgage holder (tax payer) will not be able to get a tax break anymore from 2013; not JUST new homebuyers 😉 😉 ………. this will affect purchases of new homes and also spending power of existing owners … 😯 😯

    vat on building and reformas goes to 21% – BLACK money back in fashion; did it ever go away?? 😆 😆 😆

    Oh dear, you are wrong again, check it out. 😆 😆 😆 😆 😆 😆 🙄 🙄 🙄 🙄 🙄

  • #110828
    Profile photo of katy
    katy
    Spectator

    @UBEDA wrote:

    Glasses/lenses go to 10% not 21% 😳 😳 ; also, any mortgage holder (tax payer) will not be able to get a tax break anymore from 2013; not JUST new homebuyers 😉 😉 ………. this will affect purchases of new homes and also spending power of existing owners … 😯 😯

    vat on building and reformas goes to 21% – BLACK money back in fashion; did it ever go away?? 😆 😆 😆

    Oh dear, you are wrong again, check it out. 😆 😆 😆 😆 😆 😆 🙄 🙄 🙄 🙄 🙄

  • #110530
    Profile photo of Fuengi (Andrew)
    Fuengi (Andrew)
    Participant

    according to this article http://www.laverdad.es/murcia/v/20120714/economia/gobierno-sube-trece-puntos-20120714.html

    From article:
    La medida equivale a subir trece puntos de IVA algunos productos de primera necesidad, entre los que destacan las gafas (y lentillas) y los servicios fúnebres. En la misma proporción se dispararán los precios de los espectáculos (teatros, cines, circos, discotecas…), los servicios de peluquería y estética (salvo en pequeños negocios regentados por autónomos y sujetos al régimen de módulos, que verán aumentada su tributación mediante este mecanismo) y determinado material e instrumental sanitario y agrícola.

    Translation (rough):
    The measure is equivalent to thirteen point increase in VAT from some goods, including: glasses (and lenses) and funeral services. aswell as prices of shows (theaters, cinemas, circuses, clubs …), hair and beauty services (execpetions for small businesses, tax breaks, etc….) and certain medical and agriculture supplies and instruments.

  • #110830
    Profile photo of Fuengi (Andrew)
    Fuengi (Andrew)
    Participant

    according to this article http://www.laverdad.es/murcia/v/20120714/economia/gobierno-sube-trece-puntos-20120714.html

    From article:
    La medida equivale a subir trece puntos de IVA algunos productos de primera necesidad, entre los que destacan las gafas (y lentillas) y los servicios fúnebres. En la misma proporción se dispararán los precios de los espectáculos (teatros, cines, circos, discotecas…), los servicios de peluquería y estética (salvo en pequeños negocios regentados por autónomos y sujetos al régimen de módulos, que verán aumentada su tributación mediante este mecanismo) y determinado material e instrumental sanitario y agrícola.

    Translation (rough):
    The measure is equivalent to thirteen point increase in VAT from some goods, including: glasses (and lenses) and funeral services. aswell as prices of shows (theaters, cinemas, circuses, clubs …), hair and beauty services (execpetions for small businesses, tax breaks, etc….) and certain medical and agriculture supplies and instruments.

  • #110531
    Profile photo of angie
    angie
    Spectator

    Andrew funeral services seems a bit extreme to whack the VAT up on, it won’t pay to die in Spain soon 🙄

  • #110831
    Profile photo of angie
    angie
    Spectator

    Andrew funeral services seems a bit extreme to whack the VAT up on, it won’t pay to die in Spain soon 🙄

  • #110532
    Profile photo of katy
    katy
    Spectator

    Included in the measures is a bail out fund (yes another 🙄 ) for the regions who are finding it difficult to borrow money…well they would wouldn’t they now they have been downgraded to junk! The funds for this fund will come from the treasury and the state lottery 😆 Sounds desperate.

  • #110832
    Profile photo of katy
    katy
    Spectator

    Included in the measures is a bail out fund (yes another 🙄 ) for the regions who are finding it difficult to borrow money…well they would wouldn’t they now they have been downgraded to junk! The funds for this fund will come from the treasury and the state lottery 😆 Sounds desperate.

  • #110537
    Profile photo of Chopera
    Chopera
    Participant

    @UBEDA wrote:

    Glasses/lenses go to 10% not 21% 😳 😳 ; also, any mortgage holder (tax payer) will not be able to get a tax break anymore from 2013; not JUST new homebuyers 😉 😉 ………. this will affect purchases of new homes and also spending power of existing owners … 😯 😯

    vat on building and reformas goes to 21% – BLACK money back in fashion; did it ever go away?? 😆 😆 😆

    This (and every other article I’ve read) says desgravacion will go only for new purchases after this year:

    http://www.expansion.com/2012/07/13/empresas/inmobiliario/1342188768.html?a=c0e73b95e6abfa6d62bc4a59a688655a&t=1342267822

    This article attempts to quantify the effects and concludes that prices will have to drop by 6 or 7% to compensate for the changes in desgravacion and VAT on a new flat:

    http://www.finanzas.com/noticias/economia/fiscalidad/20120713/deduccion-vivienda-cuanto-tendra-1457041.html

    However I’ve just heard them say on TV that the VAT on reformas will only go up to 10% though

    As with anything this (or the previous government) says, it is a complete mess, and will no doubt change as they make it up as they go along.

  • #110837
    Profile photo of Chopera
    Chopera
    Participant

    @UBEDA wrote:

    Glasses/lenses go to 10% not 21% 😳 😳 ; also, any mortgage holder (tax payer) will not be able to get a tax break anymore from 2013; not JUST new homebuyers 😉 😉 ………. this will affect purchases of new homes and also spending power of existing owners … 😯 😯

    vat on building and reformas goes to 21% – BLACK money back in fashion; did it ever go away?? 😆 😆 😆

    This (and every other article I’ve read) says desgravacion will go only for new purchases after this year:

    http://www.expansion.com/2012/07/13/empresas/inmobiliario/1342188768.html?a=c0e73b95e6abfa6d62bc4a59a688655a&t=1342267822

    This article attempts to quantify the effects and concludes that prices will have to drop by 6 or 7% to compensate for the changes in desgravacion and VAT on a new flat:

    http://www.finanzas.com/noticias/economia/fiscalidad/20120713/deduccion-vivienda-cuanto-tendra-1457041.html

    However I’ve just heard them say on TV that the VAT on reformas will only go up to 10% though

    As with anything this (or the previous government) says, it is a complete mess, and will no doubt change as they make it up as they go along.

  • #110543
    Profile photo of Anonymous
    Anonymous
    Participant

    Sorry, Can some one tell me what is ” degravacion ” ??? Is it present continuation of degarading !!!!!!!!!!

  • #110843
    Profile photo of Anonymous
    Anonymous
    Participant

    Sorry, Can some one tell me what is ” degravacion ” ??? Is it present continuation of degarading !!!!!!!!!!

  • #110546
    Profile photo of Chopera
    Chopera
    Participant

    @shakeel wrote:

    Sorry, Can some one tell me what is ” degravacion ” ??? Is it present continuation of degarading !!!!!!!!!!

    It comes from the verb “desgravar” – to claim tax relief

    For people paying income tax in Spain and with a residential mortgage it’s a pretty big deal.

  • #110846
    Profile photo of Chopera
    Chopera
    Participant

    @shakeel wrote:

    Sorry, Can some one tell me what is ” degravacion ” ??? Is it present continuation of degarading !!!!!!!!!!

    It comes from the verb “desgravar” – to claim tax relief

    For people paying income tax in Spain and with a residential mortgage it’s a pretty big deal.

  • #110848
    Profile photo of Anonymous
    Anonymous
    Participant

    Thanks, Chopera. If one does not ask one does not know !!!!!

  • #110548
    Profile photo of Anonymous
    Anonymous
    Participant

    Thanks, Chopera. If one does not ask one does not know !!!!!

  • #110860
    Profile photo of Anonymous
    Anonymous
    Participant

    Income tax from employment? We pay a Renta tax as they assume we rent out our apartment and earn income which we don’t!

  • #110560
    Profile photo of Anonymous
    Anonymous
    Participant

    Income tax from employment? We pay a Renta tax as they assume we rent out our apartment and earn income which we don’t!

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