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Taxes in the purchase of house

Buying a home is, without a doubt, one of the most important investments we make in our lives. However, it is customary not to seek legal advice in the purchase transaction, which often results in the emergence of subsequent problems that would have been easily avoidable. One of these problems concerns the taxation of the sale and purchase, but there are many other problems that can arise, such as the proper verification of pre-existing charges, descriptions of boundaries, the existence of third party rights, etc.

We will focus this article on the taxation and added expenses to the purchase of a house, since, approximately, it means an increase between 8 and 13% of the price of the house, and normally these amounts are not included in the bank financing.

Firstly, the value added tax and the transfer tax is one of the most important payments. Both taxes are applied in an exclusive manner, that is, either VAT is paid or transfer tax is paid: the purchase is subject to VAT if it is a new home purchase in the first transfer; and transfer tax is due on second hand purchase transactions (second transfer). At this point, it is convenient to clarify that a home that is acquired directly from the developer even if the work has been completed years ago, will be considered the first transmission; while a home in which no one has lived but which has been awarded a bank due to the crisis will be considered the second transmission. This is a point on which you have to be very careful as one or another tax can make a significant difference to the price to be paid.

“…a house that is acquired directly from the developer even though the work was completed years ago, will be considered the first transfer; while a house in which no one has lived but which has been awarded a bank on the occasion of the crisis will be considered the second transfer…”

VAT is 10% of the sale price in the case of free housing, and 4% when we are dealing with a special social housing regime. The ITP, however, varies depending on the Autonomous Community. For example, in Madrid a transfer tax of 6% is paid, in Galicia it varies between 4 and 10% (depending on the economic situation of the buyer), in Andalusia it is also variable between 8 and 10% depending on the taxable base, and in the Valencian Community there is a general rate of 10% and two reduced rates of 8% and 4% in special situations.

On the other hand, the legal documents necessary for the sale do not escape being taxed either. Thus, another of the taxes in the case of new housing is the documented legal acts (AJD) that also has different rates depending on the territory in which the housing is located, ranging between 0.5% and 1.5%. Thus, in Andalusia, the AJD represents 1.5% of the price of the dwelling (although with special rates in certain circumstances that vary between 0.1% and 0.3%); for its part, in the Valencian Community, the AJD rate is 1.5% in the generality of cases, although there are special cases, such as rates of 0.1% in the first copies of public deeds that document the acquisition of a main residence or the constitution of mortgage loans for the acquisition of a main residence for a large family, or an example.

In addition, the AJD tax is also applied at the time of constituting a mortgage and the value taken as a reference is the total value of the mortgage liability, which is normally much higher than the amount that the bank lends us.

In addition to these cases, which are the most important, we must also count on the fees of the Notary’s office, of inscription in the Property Registry and, sometimes, with parallel expenses that the bank imposes on us to grant the mortgage such as those of valuation of the house or constitution of insurances.

The failure to declare and pay the amounts derived from the taxes we have analysed can lead to the imposition of significant penalties, so we recommend that you hire legal advice to ensure that the sale is completed successfully and without any unpleasant surprises.

For this purpose, at Abolex we offer you our offices, where we will be happy to assist you.

 

Make your enquiry now. First consultation is free of charge and under no obligation.

 



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