This is a website for buyers, owners, and sellers of property in Spain, offering reliable information and resources to help you get things done with confidence. It is run by Mark Stücklin, author of the Spanish Property Doctor Column in The Sunday Times (2005-2008), and the book ‘Need to Know: Buying Property in Spain’ published by Collins.
The transfer tax on resale properties in Catalonia and the Valencian Community has gone up from 8pc to 10pc this month – a move that will drive down asking prices, reduce sales, or increase undeclared payments in cash, or all three at once.
In just another mystifying move by the the Spanish administration – in this case the autonomous regional governments of Catalonia and Valencia – the tax on buying a resale property, known in Spain as the Impuesto sobre Transmisiones Patrimoniales, or ITP for short has gone up to 10pc this month.
This tax increase was announced several months ago in Catalonia, with delayed effect to the 1st of August. But in the Valencian Region it has just been announced, taking everyone by surprise, and will be effective as soon as it is published in the Valencian region’s official gazette.
At 10pc, the ITP on buying a resale property in Catalonia & Valencia is now the same rate as VAT on new homes, which the national Government in Madrid increased from 4pc to 10pc at the beginning of the year.
The Catalan Government hopes to raise an extra €50 million this year with the increased tax. The Valencian Government hopes to raise an extra €30 million this year, and €75 million next year.
Higher tax rates could mean lower tax revenues
In reality tax revenues could easily go down as a result of the higher ITP; the higher tax might discourage buyers completely, or encourage them to resort to under-the-table cash payments that are bad for the economy. Undeclared cash payments had been dying out in recent years, but higher taxes might bring them back into fashion.
To compensate for higher taxes, vendors will have to reduce their asking prices by a corresponding amount in order to make sales (or accept bigger cash payments). The way things are in Spain today, local buyers simply cannot afford to pay an extra 2pc in tax. So most of all, this is bad news for vendors, especially the banks.
Catalonia & the Valencian Region, like the rest of Spain, are going through a serious economic crisis, at the root of which lies a real estate crash, and they need higher transaction charges now like a hole in the head. Higher taxes are bad news for the housing market and the economy.
In a real estate crash of this magnitude, transaction costs of 10pc or more are a big part of the problem. What Spain needs now is lower taxes on property, to stimulate the market and encourage foreign investors. That would help reduce the housing glut, increase tax revenues through volume, shrink the black economy, and create wealth and employment.
By raising the ITP in Catalonia & Valencia from 8pc to 10pc, local politicians are doing their bit to delay a recovery in the housing market and the wider economy.
Howard Burrell says:
And here’s me thinking our UK government were the experts at self flagellation.
Marilyn Ward says:
I think Spain holds the lash with the most barbs. This article appeared in my in-box just after I had withdrawn an offer on a property in Javea (Valencia region) for the very reason that the tax had gone up by 2 percent. With a government like this, does one really want to go and live in Spain?
First (?) casualty of the new tax increase.
Chris Nation says:
Marilyn, if you like it enough to make an offer, why not knock off the 2% + a bit more for the possibility of a deferred ‘black money’ ITP surcharge and explain to the vendor that their government is responsible for making you revise your offer?
People will not get the message that it is state and provincial governments that are making life even more difficult unless they are faced with the direct consequences. Otherwise they may go on believing what the Spanish Finance Minister said some time ago, “It is ALL the fault of the American banks.”
Chris Nation says:
This, after the ‘Buy Now – Pay Extra ITP Later’ [and we won’t say how much or when – because we know you’re all cheating on these ridiculously low prices] and the ‘Pay Tax on Your Off-Grid Lekky’.
Some months ago I wrote on another site that Spain was being run by bandits and buffoons. Nobody likes a smart-arse but – I just can’t help being right all the time…
Edislaw says:
The effect of this tax, let alone these latest increases, and the power of the taxman to simply decide what he should have received regardless of the sale price has persuaded us to take or quarter million euro and spend it in Bulgaria where we can buy a farm, renovate it and furnish it in lavish style for less than the cost of a tired Spanish resale. This is not a forecast simply a sttement of a decision we have made.
Add to that less bureaucratic interference, lower taxes and a lower overall cost of living and you have a recipe for Spanish bankruptcy.
Alan Bull says:
I am one of the owners robbed by the ladrons who run Spain after 27yrs
Owning property there I feel there is only way for Spain is down the toilet
They think by robbing people with these taxes is there way out of trouble.
Alan
David says:
Having retired recently we WERE looking to buy a property in the Valencia area…. However 10% of £200,000 is now too much to pay for us . So we will ask our intended seller to reduce the price or we will pull out of the deal. Why do ( well off ) politicians not understand that this increase will actually REDUCE the amout of tax collected. !! First Cyprus then France and now Spain seem to believe that “rich” foreigners will dig them out of a hole ??
mark says:
I bought a house for 200+k back in the UK and it cost me 1800 pounds for everything. I´m thinking to buy a flat in Barcelona for 120k and I´ll have to pay 15k between taxes and fees. I mean come on! Get real Spain or you are definitely going to crash and burn….
Michael says:
I don’t know how you managed to pay just £1,800 all in, bearing in mind that the stamp duty alone would have been 1% of the price, i.e. at least £2,000. not to mention lawyer’s fees, search fees, Land Registry fees etc.
James Faulkner says:
I just sold a place in Catalonia. We desperately tried to get it through before this latest tax increase in order to help the buyers, but were unable to do so. The sale did go through, but there is no doubt in my mind that the Spanish tax authorities are shooting themselves in the foot here. They are so desperate for money to pay for all their palaces and general wasteful standard of living, not to mention very widespread corruption…
In the wake of the sale I have just learnt that I have to pay 5% in tax on the plus valia or value increase… I made a 50000 euro loss, but have to pay a 500 euro tax on the increase in value?!? No way. I am happily out of there!
I love Spain, but no longer wish to be a property owner there. I now think, as Edislaw, says, that Bulgaria may be the place to be!
craig says:
I’ve been searching online to find the official news release but I can’t find it. Could anyone send me a link or official details where I can find a date when the increase to 10% for ITP will take place in Valencia. Thanks!
JC says:
You say the tax on pruchases is in Catalonia: of 10% but with exceptions for first time buyers? Well I suppose I am a first time buyer as i am not resident and it is indeed my first ever pruchse in spain. Can you direct me to some information regarding this?
Many thanks
Mark Stücklin says:
Young adults, residents only. It won’t help you.