Building transfer taxes in Spain

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En aquest article, l’economista Gerard Luna va facilitar a un client nadiu anglès d’ADVISORIA les explicacions sobre els impostos indirectes en la compra venda d’immobles a Espanya que necessitava. El nostre equip es continua formant cada setmana per actualitzar el vocabulari en anglès de les seves àrees.

From the point of view of the indirect taxation, a building transfer can be subject to VAT or subject and exempt to VAT. If it is exempt to VAT, the transfer is subject to ITP (Impuesto Transmisión Patrimonial).

  1. The first property transmission are always subject to VAT.
  2. The second and following transmissions are subject to ITP (Exempt to VAT).

The definition of a first transmission is:

  1.  A sale of a new construction or a building that has been structurally rehabilitated. The date sale must be as maximum 2 years after the construction or rehabilitation of the property.

The other cases are not considered first transmission, so are considered second or following transmissions, and consequently are EXEMPT to VAT.

This rule is the same for residential properties or commercial locals.

1.      FIRST PROPERTY TRANSMISSIONS

The first property transmission is subject to VAT, the percentage applied are:

  • Residential properties: 10%.
  • Commercial locals: 21%.

2.      SECOND AND FOLLOWING PROPERTY TRANSMISSIONS

The second and following property transmission are subject to ITP. This tax is delegated to the corresponding “Comunidad Autonoma” and the percentages applied is different for each Territorial Tax Office. The common percentage applied in the most important territories in Spain are the following:

C.C.A.A. % ITP
Catalunya 10%
Comunidad de Madrid 6%
Comunidad Valenciana 10%
País Vasco 6%

It is crucial to take into account that each “Comunidad Autonoma” has its percentages and its reductions for specific transactions. If we focus on Catalonia, as we already said, the common percentage applied is 10%, but there are specific cases:

1. The amount that exceeds the 1.000.000€ of sale price is taxed at 11% of ITP. Therefore,

  • From 0€ to 1.000.000€ à 10%
  • More than 1.000.000€ à 11%.

2. Urban property bought by real state companies has a reduction of the 70%. So the ITP paid in Catalonia is 3%.

Requirements to fulfill:

  • The buyer is a Real State Company and its activity epigraph informed in the Tax Office is PROMOCION Y EDIFICACIONES (833.2).
  • The property is bought to be sold. Therefore, it must be accounted on the books as a stock/good. (Pending to sale). Its use cannot be company offices, renting, etc.
  • The property must be sold in less than 5 years.

So, if the finality of the property is to get renting incomes, is not possible to apply 3% of ITP.

3 . Transmission of a residential property that becomes the usual residence of a large family: (5% ITP)

Other requirements to fulfill:

  • The buyer must be a member of a large family. In Spain, a “Large family” is a family with at least three children or two children and at least one of them disabled.
  • The sum of the “Income Tax Base” of the family unit members cannot be higher than 30.000€. (A tax advisor should revise this).

4 . Transmission of a residential property that becomes the usual residence of a 32 years old or younger person: (5% ITP)

Other requirements to fulfill:

  • Its “Income Tax Base” cannot be higher than 30.000€. (A tax advisor should revise this).
5 . Transmission of a residential property that becomes the usual residence of a disabled person: (5% ITP)

Other requirements to fulfill:

  • The disabled percentage must be at least the 65%.
  • The sum of the “Income Tax Base” of the family unit members cannot be higher than 30.000€.
  • The disabled person must be the buyer or a member of the family unit.

INVERSIÓN DEL SUJETO PASIVO (PASSIVE SUBJECT REVERSION)

If the transmission is subject but exempt to VAT (Therefore, is subject to ITP) in some cases the seller is able to renounce the exemption of VAT and apply the “Passive subject reversion”.

Commonly, if the transmission is subject to VAT, the seller is the passive subject and includes VAT in the invoice. In this case, the passive subject is reversed to the buyer and he self-imposed and deduct the VAT of the operation.

Therefore, the invoice sent by the seller DOES NOT include VAT, so the buyer do not have to pay it.

To be able to apply the “Passive Subject Reversion”, the seller and the buyer must be passive subject of VAT who carry out a professional or business activity. (Companies or individuals).

The buyer must has right to deduct total or partially the VAT of the operation.

Therefore, the seller should send to the buyer an invoice detailing the amount of the property transaction without VAT. The invoice should include the following text:

“Operación sujeta a Inversión de Sujeto Pasivo en virtud de lo establecido en el artículo 84. Uno. 2º. E) de la Ley 37/1992, de 28 de diciembre, del Impuesto sobre el Valor Añadido.”

ACTOS JURÍDICOS DOCUMENTADOS (AJD)

When a property transmission is subject and NOT exempt to VAT the buyer has to pay “Actos Jurídicos Documentados” (AJD). This tax has to be paid to the corresponding Territorial Tax Office. If we focus on Catalonia, there are two different percentages applied over the total sale price is:

  • Sale with VAT (10% or 21%), the AJD.
  • Sale with “Inversión del Sujeto Pasivo”.

 

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