Buying a home
The purchase of a new property (initial handovers) is subject to Value Added Tax (VAT) and Stamp Duty, a tax that the government levies on certain legal documents, which is known as Tax on Documented Legal Acts - Impuesto sobre Actos Jurídicos Documentados – (AJD):
• The VAT rate for a new home in Spain is 10%.
• Stamp duty (AJD) is applicable to notarized documents, including title deeds. The rate of stamp duty (AJD) in the Valencian Community is 1.5%.
The portion of the stamp duty charged for the ownership deed is payable by the buyer.
It is important to remember that there are other expenses which, although they are not taxes, are compulsory when purchasing a new property:
• Land registry charges.
• Notary and management costs.
Selling a home
Capital Gains Tax (Tax on the Increase in the Value of Urban Land (IIVTNU))
Capital gains tax, known in Spain as “Tax on the Increase of the Value of Urban Land”, (IIVTNU) or “plusvalía municipal,” is a local tax on the increased value of urban land which is charged on transfer of ownership.
Because this is a local or municipal tax, each city council sets the percentage used to calculate the value of the house. Therefore, the amount to be paid will vary depending on where the home is located.
The vendor or party or transferring the property is subject to tax:
• In case of a sale or any other legal transfer for valuable consideration.
• However, if the seller or party transferring the property lives abroad, the buyer or acquirer is taxable and liable as a substitute for the taxpayer.
There are two rules or procedures used to calculate the tax payable: the real system and the objective system. Taxpayers are free to choose the method that is most beneficial to them.
1. Objective system:
Taxable Base = Cadastral Value x Coefficient
2. Direct Estimation System or Real Increase in Value:
Taxable Base = Comparison of the value of the land declared or verified in the purchase and transfer
Non-resident income tax
Non-resident sellers must pay 19% of the profit obtained when the property is sold. This is calculated as the difference between the purchase and sale prices. This tax is filed using the Non-Resident Income Tax Form, which is form 210.
In transfers of properties from non-residents, the buyer must withhold 3% of the sale price and pay it to the Tax Agency. This must be filed within one month of the sale using Form 211. This withholding is a payment on account of the tax that must be paid by the non-resident for the profit obtained in the transaction.
