The tax increase was introduced without warning on Saturday 31 December, and went largely unnoticed until now.
Whilst the central government in Madrid is making noises about reducing the sales tax (ITP) on resale properties to bring it more in line with VAT rates on new property (4pc), the regional government in Andalucia has introduced a sneaky increase in the ITP rate making it more expensive to buy a resale property in Andalucia.
As a result of this change, someone buying a resale property in Andalucia for €1 million will now pay €89,000 in ITP, and increase of €13,000, or 17pc more than last year.
This makes the tax difference between new builds, which incur VAT, and resales wider than ever. VAT on a new home costing €1 million would be just €40,000, compared to €89,000 of ITP for a resale property. So Andalucia’s tax policy discriminates heavily against private vendors in favour of banks and developers selling new homes.
The sneaky way in which the tax was introduced, without warning on Saturday 31 December, speaks volumes about how popular this tax increase is going to be. It is likely to increase the popularity of undeclared cash payments, something that had been on the decline for years.
The following table sums up the changes in Andalucia’s ITP tax.