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Extension of VAT reduction to apply to holiday homes in Spain

VAT on new holiday homes in spain
CGI / render of a new development for sale in Javea, Alicante (Spain)

The condition excluding newly-built holiday-homes from VAT reductions appears to have been dropped.

When the Socialist Government introduced a VAT reduction on new homes sold last year, from 8pc to 4pc, the People’s Party, then in opposition, promised to extend the reduction to the end of 2012, but only on primary residencies up to a certain price.

But now that the PP are in power it appears that they have dropped these conditions, which can only be good news for holiday-home buyers looking to take advantage of the crash in Spain’s new home prices.

The decree extending the VAT reduction to the end of the year, published in the official Government bulletin (BoE) on the 31st of December, made no mention of any extra conditions, meaning that VAT on all new home sales, whatever their use and value, will only be charged at 4pc during 2012. So if you find a newly-built holiday-home for sale in Spain that you want to buy, you will only pay 4% VAT if you buy it in 2012.

11 thoughts on “Extension of VAT reduction to apply to holiday homes in Spain

  • A sensible move – not many of those about at the moment. Pity there is nothing being done about the Transfer Tax on resale property. It should be obvious that increasing the sale of such property will also lead to an increased demand for NEW houses as people trade up.

  • Our bank in Torre Del Mar has said this reduction only applies to “Habitual Residence” i.e. not for holiday homes. Can anyone confirm definitively if this tax is a true extension from last year or if it is designed to exclude us British holiday home owners

  • Mark, your response is really appreciated and I translated the BoE Bulletin and the associated act and there seem to be no limits, my abogado seems to think there are no conditions either.

    In your opinion, do you think this 4% applies only to the balance to complete or is retrospective on the whole purchase (i.e. includes the deposit ans stage payments?)

    Very Best Rgds

  • I can confirm that this VAT reduction extension applies to all new homes, including holiday-homes bought by non-residents. But I can’t tell you if it is retrospective on deposits and stage payments. Your lawyer will have to look into that. Let us know if you get to the bottom of that question.

  • There seem to be so many factors involved. Will the Euro break up? Will Spanish house prices fall further significantly? Will taxes like IBI continue to go up? All these make up an impossible equation to figure out … unless of course the house you are buying is at an amazing low price. We reserved our house in 2004, were due to complete in 2006 but only got the license to complete in Nov 2011. Although the 2004 price looks ok, it is a touch on the high side and with all the other factors like the uncertainty on the euro mortgages, we cant make a decision?

  • I remember reading something about the reduction that Spain made on property taxes, which was stated as being illegal according to European law / agreements??? I don’t remember the exact details, but am sure it related to this subject, and was going to get Spain into more trouble!

  • Just confirming the following after some more discussions with Spanish Abogados:

    1. Deposits made pre August 2011 using 8% IVA cannot be rebated.

    2. The balance to be paid before end 2012 will attract 4% IVA.

    3. As stated by Spanish Property Insight, the 4% IVA applies to anyone who is buying a new property direct from the Builder/Developer/Promoter.

    … I hope it doesn’t get withdrawn due to some EU directive!!

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