[BUYING AND SELLING REAL ESTATE IN SPAIN] 243
- Value Added Tax –VAT: (“Impuesto sobre el Valor Añadido IVA”): The supply, leasing or letting of Commercial Real Estate or of a building for first occupation is subject to Spanish VAT. Second and further supplies of a building or of parts thereof are exempt from VAT. However, in so far as commercial real estate is basically aimed at developing business activities and most buyers of this kind of real estate also qualify as taxable person for VAT purposes as they are generally dedicated to the development of business activities, said buyers by waiving to the tax exemption, are allowed to exercise a right of option for taxation under VAT for these supplies, leasing and letting of commercial property. By way of this mechanism, buyers are entitled to deduct and to obtain reimbursement of the VAT paid with the property acquisition provided that statutory requirements are complied with. Should these requirements fail, the transaction would be subject to Property Transfer Tax. Finally, the building activity is also subject to VAT. There are different applicable VAT rates depending on the nature of the transaction, the general tax rate is 21%. - The Property Transfer Tax (“Impuesto sobre Transmisiones Patrimoniales – ITP”): This tax is imposed, among other acts, over the second and subsequent transfers of property. When dealing with Commercial Real Estate Transfers, this tax is rather unusual as buyer generally exercise the right of option for taxation under VAT. If requirements under VAT regulations fail, the transfer of the property will then be subject to
this tax. The tax rate is different depending on each Spanish region and calculated (percentage) according to the purchase price that appears in the Public Deed of transfer. Percentages applied by the different Spanish regions move between 4% and 10%. - Public Document Tax (“Actos Jurídicos Documentados –AJD”): This tax is applied to the execution of agreements or rights when they are granted as notarial, trade and/or administrative documents in Spanish territory (or abroad if they have legal or economic effects in Spain). Rates applied depend as well on the Spanish region it is executed and on the final Tax applied to the transaction (VAT or Property Transfer Tax). When VAT is applied to the transfer of property, the rates of this tax move between 0.4% and 1.5% of the purchase price. - Tax on the Increase in Value of Urban Land (“Impuesto sobre Incremento del Valor de los Terrenos de Naturaleza Urbana- IVTNU”): This is a local tax which is levied on the implicit value increase that urban land gains by time elapse, therefore, this tax is calculated considering the time passed since the last transaction -exceeding of one year-. The taxable amount is based on the property cadastral value (not the sale and purchase price) of the land and the effective rate increases from 3,7% to 3% depending on the property holding period. In addition to the precedent, if the buyer takes out a mortgage loan, these are the associated fees and costs:
ILN Real Estate Group – Buying and Selling Real Estate Series
Made with FlippingBook Online newsletter