In April this year, a temporal reduction of the ITP Transfer Tax and AJD Stamp Duty Tax for buying an existing or new build property was announced by the Regional Government of Andalusia for the year 2021. The reason for this decision was to give the housing market in Andalusia an extra impulse after the COVID crisis.
This tax benefit, however, was supposed to end by the 31st of December for which the volume of sales/purchase has been rather large in this last quarter. Nevertheless, recently the Andalusian authorities communicated that these tax reductions will become permanent.
What is the benefit of ITP transfer tax when buying an existing property?
The new ITP tax rate (Impuestos Transmisiones Patrimoniales) is 7% over the total purchase of an existing house, apartment or other real estate property. Previously, however, the tax consisted of three progressive scales: 8% over the first 400.000 Euros, additionally 9% over the amount up to 700.000 Euros and 10% for any amount over this last value.
These tax scales were counted per tax identity, which means that for f.e. Dutch or Belgian buyers purchasing a more expensive, luxury property was less attractive if they were married to the standard in the Netherlands and Belgium, which is ´commonhold´ or ´community of goods´. However, if they had signed a nuptial agreement before buying, then the 9% tax scale would only apply for the amount above 800.000 Euros instead of only the first 400.000, as in this case there were 2 different fiscal identities according to the Tax Office. So, because of this new tax law, the type of marriage isn’t important anymore now.
What is the new rate for the AJD Stamp Duty for newly built properties?
AJD Stamp Duty Tax (Actos Jurídicos Documentados) is paid when buying a new build or off-plan property or promotion from a developer through the purchase deeds or when inscribing any new constructions through a New Build Declaration, both deeds signed at the notary. The old rate of 1,5% is now lowered to 1,2% and the tax declaration needs to be done within 30 working days after the signing, just as with normal ITP tax.
When buying a newly build property from a developer the buyer in addition pays 10% VAT (IVA or Impuestos de Valor Añadido/Agregado) which is a tax rate determined by the national government of Spain.
Do these permanent tax reductions favour buyers of luxury homes in Andalusia?
In Andalusia and on the Costa del Sol the market currently shows a large demand for luxury homes in the real estate market, both existing and new build. This goes specially in towns like Marbella, Málaga, Fuengirola, Benalmadena, Estepona and Nerja but also on the Costa Tropical in for example Almuñécar (Granada province). With this new tax rate, the ITP tax scales don’t apply anymore, so this obviously favours wealthy buyers relatively more than average buyers. Clearly, the regional government sees an interest in actively keep attracting this specific group to invest in sunny Andalusia.
C&D Solicitors, Malaga (Andalusia), specialists in property law
C&D Solicitors is a Spanish law firm in Torrox, Malaga, specialized in guiding purchases in Andalusia from foreign buyers. Besides conveyancing/property law we also handle inheritance cases and in our office we speak English, Dutch, Swedish, German and French.
Author: Gustavo Calero, lawyer at C&D Solicitors (Torrox, Malaga)