Property transfer tax in Spain applies if the property is considered as second or posterior transfer. When a property is being re-sold it incurs a certain transfer tax, usually between 6%-10%. Such tax is always a cost for the buyer and it is levied on transfers that are not subject or are exempted from VAT.
The standard VAT rate in Spain is 21%, which applies to real estate transactions as well. An additional stamp duty of 1,5%-2% is added to the standard VAT, therefore 21%+1,5%-2%. It is allowed for taxable entrepreneurs to deduct the total VAT paid in purchasing goods or services for use in their business from the total VAT charged in supplying goods and services to their customers. However, any expenditure that is deemed to be unnecessary for business proposes, or for the acquisition of goods or services used for a VAT-exempt activity cannot be deducted from the VAT.
Taxes applied on property purchase differs depending on whether it is a company – individual transaction or company – company transaction.
The seller (Company) is liable for VAT, whereas the buyer being an individual pays no VAT. The buyer (Individual) instead pays transfer tax of 6%-10%.
In this case, both of the parties are liable for neutral VAT at 21%. And are also subject to additional stamp duty of 1,5-2%.
Acquiring properties through a share deal is exempt from transfer tax and VAT. A legal exception to this rule exists for transactions where 50% or more of the company’s assets comprise Spanish real estate not used for business activities and where as a result of the transfer, the purchaser ends up holding an interest over 50% in the share capital of the company. In such case, the transaction would be subject to transfer tax at a rate of 6%-11% or VAT at a rate of 21% or 10% of the value of the underlying real estate assets at the time of the transfer.
If You intend to purchase Real estate in Spain or want consultancy in the applicable taxation, don’t hesitate to contact our English speaking experts at: firstname.lastname@example.org