Changes in Spanish tax legislation may hit the pockets of property buyers

Изменения в налоговом законодательстве Испании могут ударить по карману покупателей недвижимости

Before deciding to buy a property in Spain, check what property transfer tax you will have to pay.

Since this year, the Spanish tax authorities have been using a new formula to calculate the property transfer tax that buyers must pay when buying a home in Spain. This can take foreign investors by surprise and in some cases leads to a significant increase in this tax. Fortunately, there is a way to find out its size before buying, besides, these changes do not affect real estate in new buildings.

Spanish Property Transfer Tax — Impuesto de Transmisiones Patrimoniales (ITP)

When buying a secondary property in Spain (unlike new buildings), the buyer pays a tax on the transfer of property. This tax varies depending on the region of mainland Spain (there is a different system in the Canaries) and can reach 10% in regions such as Catalonia and Valencia. Previously, it was based on the declared value of the sale — the amount that the buyer paid the seller. This amount was indicated in the act of sale (escritura).

Since the beginning of 2022, the tax authorities have been using the largest of the following values: either the amount paid to the seller, or, which is an innovation, the cadastral value. Thus, if the cadastral value is higher than the amount indicated in the deed of sale, you will end up paying more tax.

The cadastral value is theoretically based on market prices in each district. It is assumed that it is updated every year in every municipality of Spain based on housing sales certified by notaries, which means it depends on the number of sales in each area. It is easy to imagine how this reference value may differ from real market prices in such a heterogeneous area as real estate. And the fewer sales there are in the region, the greater the error may be in calculating the cadastral value.

Under the new rules, property transfer tax is paid based on the cadastral value if it is higher than the amount you paid to the seller. At the same time, it is allowed to reduce the tax amount by 10% (i.e., the cadastral value is multiplied by 0.9).

The specifics of the property you are buying do not matter at all. You can run into a fine if it turns out that the tax paid, based on the amount in the deed of sale, is less than it would have been paid based on the cadastral value.

How to check the cadastral value for calculating property transfer tax

How do I check the taxable value of secondary real estate? This should be done by your real estate lawyer, but if you have a Foreigner Identification Number (NIE), you can also check it yourself. To do this, go to the Spanish Cadastre website and click on the “Valor de Referencia” button on the main page, then “Consulta de valor de referencia” and enter your NIE number and auxiliary number (also on the NIE document). On the next page, select “Efectos informativos”, the current date and enter the cadastral number of the property you want to check. If everything is correct, the cadastral value will be indicated on the next page and you will be given the opportunity to download the certificate. If the cadastral value is higher than the price agreed with the seller, then this value will be used to calculate the property transfer tax.

For example, when buying a property in Barcelona with an agreed price of 500,000 euros, and a cadastral price of 600,000 euros, the property transfer tax will be 54,000 euros (600,000 euros x 0.9 = 540000 euros and we take 10% of this amount).

The new property transfer tax calculation scheme may deter some foreign buyers who would prefer to invest in real estate in other countries. And since the changes do not apply to purchases of housing in new buildings, which are still subject to VAT at the rate of 10% of the sale price, buyers’ interest may shift from secondary real estate towards new buildings.


Leave a Reply

We use cookies to give you the best possible experience on our site. By clicking "Accept", you agree to our use of cookies.