Andalusia lowers taxes including Property Transfer Tax and Stamp Duty in move that will boost the market

Lawyer Raymundo Larrain gives us a brief rundown on the recent tax changes in the region of Andalusia, where the property transfer tax and Stamp Duty have been slashed in a welcome move for the housing market.

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andalusia property market
Andalusian coastline Photo credit https://twitter.com/alpinesi

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
28th of April 2021

On Monday this week, the political parties in Andalusia’s coalition government – Ciudadanos, Vox, and Partido Popular – publicly agreed to lower taxes in the region of Andalusia. Concretely the following six taxes will now be significantly reduced:

  • IRPF (personal income tax)
  • IHT (inheritance tax)
  • Patrimonio (wealth tax)
  • ITP (property transfer tax)
  • AJD (stamp duty)
  • Taxes on gambling

Frankly, I’m not quite sure how they plan to reduce IHT furthermore, as over the last three years none of our clients have paid anything on inheriting an estate in Andalusia since the drastic changes in IHT of April 2019, but it’s welcome news of course.

For anyone who’s been following my articles over the years, they’ll know I am a staunch defender of lowering taxation across the board as I strongly believe it greatly attracts foreign investments, thus creating jobs and wealth on its wake.

Raising taxes is a futile exercise (even counterproductive), as you only chase away taxpayers, which leads to job losses and eventually a generalized impoverishment of society at large. Ironically, Andalusia has never made more money in taxes since it lowered them in 2019! In Economic theory, we know this as the Laffer curve.

This news is simply excellent, and a welcome respite at a time when the market is challenged due to the ongoing Covid-19 pandemic. But wait, it gets even better. Read on.

Andalusia slashes Property Transfer Tax (PTT)

The Andalusian parliament enacted a new law, which has been published in Andalusia’s Official Law Gazette (BOJA), which slashes PTT for 2021. This is a temporary measure devised to offset the negative repercussion of Covid-19 in the property market, and help to foster and kickstart property transactions. It will only last until the end of this year. So anyone whose thinking of buying a property in Andalusia, better get moving.

Until now, Andalusia followed a sliding scale for ITP that started at 8% and went to 10% contingent on the sale value. This has now been struck off, and a unique tax rate of only 7% applies regardless of the sale value.

This change will be in force as from the 28th of April 2021 until the 31st December 2021.

Before:

Residential property sale price Tax rate
Up to 400,000€ 8%
400,001€ – 700,000€ 9%
701,000€ up 10%

Now:

Residential property sale price Tax rate
Any 7%

This tax change translates into a massive tax saving for property buyers in Andalusia. Let’s see it with an example. A British couple buy a 500,000 euro property in Andalusia (they are chasing a  Golden Visa).

Tax to pay before: €41,000

Tax to pay now: 35,000

Tax savings of 15% or €6,000, for this example.

What’s important to note, is that this tax-saving grows exponentially in line with the sale price; the higher the sale price, the larger the % saved in taxes.

Again, with examples. On a 1.5mn sale price, the tax saved is almost 25%. On a 3mn sale price, the tax saved is 27%, and so forth.

This is why buyers sitting on the fence should seriously consider buying now and take advantage of this time-gated opportunity to save a huge amount in transfer tax. I stress this tax advantage ends on the 31st December 2021.

Andalusia reduces Stamp Duty  

If the above wasn’t enough, they have also approved to slash Stamp Duty from 1.5% down to 1.2%

Whilst Stamp Duty doesn’t impact on resale property, it does affect off-plan. Anyone buying new-build property will now make a considerable tax saving with this new tax change. That’s a 20% tax saving, not bad; not bad at all!

If only our beloved Communist leaders in Madrid followed suit, what a wonderful world this would be!

L’art de l’imposition consiste à plumer l’oie pour obtenir le plus possible de plumes avec le moins possible de cris.” – Jean Baptiste Colbert.

French economist and Finance Minister under King Louis XIV.

Translated as: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

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Article also published at Larrain Nesbitt Abogados: Andalusia lowers its taxes – Property Transfer Tax slashed!

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