Explanation of the reduced taxes on property transfers in Andalusia
The Spanish autonomous community of Andalusia recently decided to maintain the reduction of taxes on property transfers. That is why Azull, the market leader in the sale of Spanish real estate, has asked me to explain the consequences for Belgian buyers.
How much does a second residence cost in Spain? Some background
When buying real estate in Spain, just like in Belgium and the Netherlands, you pay additional taxes on top of the agreed purchase amount. For new construction, these taxes in the peninsula and the Balearic Islands consist of 10% VAT on the one hand, and the Tax on Documented Legal Acts (AJD) on the other. The stamp duty varies according to the autonomous community and ranges between 1.20% and 1.50% of the purchase price.
In case of resale, there is only one right of sale (ITP). The right to sell also depends on the autonomous community. For example, the ITP on the Costa Blanca is 10% and in Murcia 8%.
Before the pandemic, Andalusia applied progressive rates for the ITP. For a resale with a purchase price of up to €400,000, the right of sale was 8%. You paid 9% on the amount between €400,001 and €700,000. And the amount of 700,000 was taxed at 10%. In principle, these rates are per person, unless you are married under community property. For example, if you buy a property worth 800,000 euros with your partner, without being married under the community property regime, there is a rate of 8% on 400,000 euros for both of you.
Reduction of transfer taxes due to the pandemic
Due to the lockdowns in 2020, we saw a 17% decrease in the number of real estate transactions (National Institute of Statistics). Andalusia decided, therefore, to support the real estate market by lowering property transfer taxes. Specifically, in April 2021 it was decided:
- make second-hand homes more accessible to Spanish families by lowering the ITP to a flat rate of 7%.
- counteract the slowdown in the construction sector by making new-build housing more attractive by lowering the AJD to 1.20%.
However, there was a major trap. The measures were only in force until December 31, 2021. As a consequence, several purchase files had to be completed in a few months, with all the consequences that this entailed.
What has changed now?
The deadline of December 31, 2021 expires. The measure will continue to apply in 2022. And this for an indefinite period of time.
So, how much does that second residence really cost you in Spain, today, in Andalusia?
Example 1: you have in mind a new house for 500,000 euros. Normally the transaction taxes amount to 50,000 euros VAT and 7,500 euros AJD. The total tax is then 57,500 euros. Today, however, he will owe 6,000 euros in stamp duty. A saving of 1,500 euros.
Example 2: You buy a resale of 500,000 euros with your married partner (community property). Sales at that time amounted to 41,000 euros. This year the sale right is 35,000 euros. A saving of 6,000 euros.
Thanks to these measures, Andalusia is currently one of the most fiscally favorable Spanish regions to invest. In addition, Andalusia also offers an interesting regime for inheritance tax, gift tax and wealth tax.
More on that another time.
Article written by Glenn Janssens