The VAT or value added tax in Spain is called IVA (Impuesto sobre el Valor Agregado). A VAT is a tax burden on consumption that is funded by the consumer. Is an indirect tax that is not perceived by the Treasury directly from the consumer, but by the seller at the time of any commercial transaction.
Value Added Tax in Spain
When talking about sale of property, if the property is newly constructed, the tax you have to pay is IVA instead of ITP (we talked about this tax in this post). Also, for new properties another tax has to be paid, the A.J.D. (Stamp Duty Tax or Impuesto de Actos Jurídicos Documentados in spanish). But for now, let’s talk about I.V.A.
The following tax rates are applied when buying a newly constructed property in Spain, in all regions except in the Canary Islands, which have an special tax arrangement.
- 10% for housing
- 21% for premises, storage rooms and garages
- 4% for subsidized housing
Stamp Duty Tax in Spain
When buying a new property taxed with IVA, the buyer has always to pay this tax too. The rate varies between 0.5% and 1.5% of the sale price, depending on the region where the property is. Sometimes these amounts can vary, like in Gipuzkoa. If this is the first transmission to a home buyer, the transaction is exempt from this tax. In other places there are reduced rates in the case of purchase of main residence such as in Valencia, where the rate is 0.1% or Madrid (0.2%, 0.4%, 0.5% or 0.75% depending on type of housing or the characteristics of the operation).
When is paid?
The IVA is given to the seller paid along with the selling price so he can deposit the money in Treasury. Tax Stamp Duty must be paid by the buyer within 30 working days from the date of signing the deed of sale by the reverse procedure.