In this article, we discuss common taxes in real estate transactions in Spain with a detailed guide.
Paying taxes after a real estate transaction is a fundamental part of the process, as it involves fulfilling the fiscal obligations for both the buyer and the seller.
Below, we detail the common taxes in real estate transactions in Spain.
Common Taxes in Real Estate Transactions
Let’s present the most common taxes in real estate transactions in Spain, and throughout the article, we will explain each one in detail.
- Property Transfer Tax (ITP)
- Value Added Tax (VAT)
- Stamp Duty (AJD)
- Municipal Capital Gains Tax (IIVTNU)
Property Transfer Tax (ITP)
What is ITP?
The Property Transfer Tax is a common tax in real estate transactions that the buyer must pay when purchasing a second-hand property. This tax is essential in the process of buying and selling used properties.
ITP Rate
The rate varies between 6% and 10% of the property’s value, depending on the autonomous community where the property is located.
Deadline and Procedure for Paying ITP
Normally, the ITP must be paid within 2 months from the signing of the deed of sale. The procedure involves submitting a specific form at the tax office of the corresponding autonomous community.
Value Added Tax (VAT)
What is VAT in Real Estate Transactions?
VAT is a common tax in real estate transactions that applies to the purchase of new homes (first transmission). It is one of the most well-known taxes and significantly impacts the total cost of the transaction.
VAT Rate
Currently, the general rate is 10% of the property’s value. However, for commercial premises, the rate is 21%.
Deadline and Procedure for Paying VAT
VAT is paid directly to the developer or builder when formalizing the sale. This payment is essential to legalize the transaction.
Stamp Duty (AJD)
What is AJD?
Stamp Duty is another common tax in real estate transactions that taxes notarial, commercial, and administrative documents related to real estate transactions.
AJD Rate
The AJD rate is usually between 0.5% and 1.5% of the property’s value, depending on the autonomous community.
Deadline and Procedure for Paying AJD
AJD is paid along with ITP or VAT, and it is submitted at the tax office of the corresponding autonomous community.
Municipal Capital Gains Tax (IIVTNU)
What is the Municipal Capital Gains Tax?
The Municipal Capital Gains Tax is a common tax in real estate transactions that the seller pays, which taxes the increase in the land value since the last transfer of the property.
Municipal Capital Gains Tax Rate
The rate varies depending on the municipality and the time the property has been held. It is important to consult the local council to know the exact applicable rate.
Deadline and Procedure for Paying the Municipal Capital Gains Tax
Generally, this tax is paid within 30 working days after the sale. It is settled at the corresponding town hall.
Comparison of Rights and Obligations According to Common Taxes in Real Estate Transactions
Each type of common tax in real estate transactions has its regulations and affects the rights and obligations of both the owner and the tenant differently. Below is a comparison of these key aspects:
Contract Duration
- Permanent Residence: Minimum of five years (seven years if the landlord is a legal entity).
- Temporary: Variable, as agreed in the contract.
- Rooms: Variable, usually by months, quarters, or academic year.
- Tourist: Short stays, by days, weeks, or fortnights.
Legal Regulation
- Permanent Residence: Urban Leases Act (LAU).
- Temporary: Civil Code.
- Rooms: Urban Leases Act (LAU), if specified as temporary.
- Tourist: Regional and municipal tourism regulations.
Tenant Protection
- Permanent Residence: High protection, right to mandatory extension and limitation of rent increase.
- Temporary: Less protection, more flexibility in the contract.
- Rooms: Less protection, more control for the landlord.
- Tourist: Specific regulations, less protection for short stays.
Landlord Obligations
- Permanent Residence: Maintenance of the property, respecting tenant rights.
- Temporary: Defined in the contract.
- Rooms: Maintenance of common areas, management of utilities.
- Tourist: Compliance with license requirements, tenant registration, police communication.
Advantages and Disadvantages of Each Common Tax in Real Estate Transactions
Permanent Residence Rental
Advantages:
- Long-term income stability.
- High protection for both parties.
Disadvantages:
- Less flexibility for the landlord.
- Long procedures for conflict resolution.
Temporary Rental
Advantages:
- Flexibility in the contract duration.
- Ability to adjust prices according to seasonal demand.
Disadvantages:
- Less income stability.
- Need to manage multiple contracts and vacancy periods.
Room Rental
Advantages:
- Greater control over the property.
- Diversification of the non-payment risk.
Disadvantages:
- Need for cohabitation with tenants.
- Management of common areas and utilities.
Tourist Rental
Advantages:
- Potential for higher short-term income.
- Flexibility for personal use of the property.
Disadvantages:
- Strict legal and administrative requirements.
- Higher tenant turnover and constant management.
Frequently Asked Questions (FAQs) about Common Taxes in Real Estate Transactions
What taxes do I have to pay when buying a second-hand property?
You must pay the Property Transfer Tax (ITP), which varies between 6% and 10% of the property’s value, depending on the autonomous community.
What is the applicable VAT for buying a new home?
The applicable VAT is 10% of the property’s value. For commercial premises, the rate is 21%.
What is Stamp Duty (AJD)?
AJD taxes notarial, commercial, and administrative documents. The rate varies between 0.5% and 1.5% of the property’s value, depending on the autonomous community.
Who pays the Municipal Capital Gains Tax in a real estate transaction?
The Municipal Capital Gains Tax is paid by the seller and taxes the increase in land value since the last transfer of the property.
Conclusion on Common Taxes in Real Estate Transactions
Understanding and correctly managing common taxes in real estate transactions are essential to avoid legal and financial problems. Planning ahead, having professional advice, and complying with established deadlines and procedures are the best practices for a successful transaction.
At Legal Boutique, we are here to help you understand and manage all the legal and tax aspects of real estate transactions.
Contact us for expert advice!
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