Great news for property buyers… Lower property purchase tax for 2022 remains at 7%!
The Junta de Andalucía has now passed into law the lowering the ITP tax (Impuesto de Transmisiones Patrimoniales).
ITP is the tax paid by the buyer when buying a property and will remain at 7% as it has been since 28th April 2021. Before then the ITP was paid according to a sliding scale from 8-10% depending on the price of the property. Up to 400,000€ – 8%…….between 400,001€ – 700,000€ – 9% ….. and over 700,000€ – 10%.
The above means that BIG SAVINGS will be made by buyers purchasing resale properties where ITP is the due tax.
For example, if you are buying a property for 1.000.000, from now on you will pay 7% transfer tax (ITP) on the whole amount, 70.000€. Before you had to pay 8% on the amount up to 400.000€ (€32,000), 9% on the amount between 400.000€ and 700.000€ (€27000) and 10% of any amount over 700.000€ (€30000). Totalling 89.000€ so there is a direct saving of 19.000€! A saving of 21,3%!
| Example 1 | |||
|---|---|---|---|
| Property Price | 1.000.000 € | ||
| Before April 28th 2021 | 400.000 € | 8% | 32.000 € |
| 300.000 € | 9% | 27.000 € | |
| 300.000 € | 10% | 30.000 € | |
| 89.000 € | |||
| 2022 | 7% | 70.000 € | |
| Saving | 19.000 € | ||
| 21,35% | |||
Furthermore, the tax savings grow exponentially in line with the sale price
The higher the sale price, the larger the percentage saved in taxes. An individual buys a luxury villa with a price tag of €3,000,000, before the tax changes were implemented, they would have paid €289,000 in property taxes, now with the tax cuts in place, they only must pay €210,000, meaning a tax savings, of 27,3% or €79,000.
| Example 2 | |||
|---|---|---|---|
| Property Price | 3.000.000 € | ||
| Before April 28th 2021 | 400.000 € | 8% | 32.000 € |
| 300.000 € | 9% | 27.000 € | |
| 2.300.000 € | 10% | 230.000 € | |
| 289.000 € | |||
| 2022 | 7% | 210.000 € | |
| Saving | 79.000 € | ||
| 27,34% | |||
| Example 3 | |||
|---|---|---|---|
| Property Price | 5.000.000 € | ||
| Before April 28th 2021 | 400.000 € | 8% | 32.000 € |
| 300.000 € | 9% | 27.000 € | |
| 4.300.000 € | 10% | 430.000 € | |
| 489.000 € | |||
| 2022 | 7% | 350.000 € | |
| Saving | 139.000 € | ||
| 28,43% | |||
Nevertheless, the saving for a lower priced home is not insignificant either; an apartment sold for 200.000€ would have paid 8% = 16.000€ before and will now have to pay 14.000€, so 2.000€ less tax to pay! A 12,5% saving.
The lower property transfer tax Andalusia 2021 is very good news for buyers of resale properties, but also for new developments…. not much but some!
The ITP is only paid on resale property whilst new development pays 10% VAT and Stamp Duty (AJD – Actos Jurídicos Documentados). The VAT rates in Spain are a Central Government competency and does not depend on the Andalusian government, so there has not been a reduction. New builds therefore remain at 10% VAT. However, the Stamp Duty (AJD) is being lowered from 1,5% to 1,2%, a reduction of 20% for buyers who are completing on new developments in Andalusia in 2022.
Covid-19 of course is the principal reason behind these tax cuts. The pandemic did hurt the real estate market, and these tax changes aim to inject a booster into this critical sector of the Andalusian economy.
Transfer tax has not been cheaper in Andalucía in the past 8 years.
If you are looking to sell your Sotogrande home, I would be happy to discuss any of the points mentioned above, and/or recommend a number of reputable lawyers.
Charles Gubbins.
✉ charles.gubbins@noll-sotogrande.com
?+34 607 911 661
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