Tha taxes payable by the “purchaser” in the purchase of real estate are:
ITP: “impuesto sobre transmisiones patrimoniales onerosas”
IVA: “impuesto sobre el valor añadido” (VAT)
AJD: “impuesto sobre actos jurídicos documentados”
As a general rule, VAT applies when the sell of the property is a first transfer or the seller is a businessman or professional.
As a rule, these two taxes are mutually exclusive, which means that an operation can only be taxed with VAT or Transfer Tax, but not with both simultaneously.
Once this is clear, we will go on to explain some special ways in which these taxes can be reduced in Andalusia.
Purchases taxed with VAT
Following on from the general rule of VAT, which establishes that the first transfer is taxed with VAT and the second and subsequent transfers are exempt from VAT (and taxed with ITP), the following possibilities exist:
- First Purchase: If the buyer will use the asset for an activity that allows him to deduct the VAT.
- Second and Subsequent Purchases: If the seller is subject to VAT (being an entrepreneur or professional) and the buyer will use the asset for an activity that allows him to deduct the VAT.
Purchases made at a reduced tranfer tax rate of 2%
This is the case of a purchase made by a Real Estate Professional.
According to the Andalusian Law, a reduced Transfer Tax rate of 2% can be applied in the case of those home purchases made by Real Estate Professionals for their resale.
However, you must know that there are certain requirements that must be met in order to apply for this reduction.
Purchases that exempt you from paying transfer tax
Buying property through the purchase of shares in a limited company.
Under current legislation, the transfer of shares shall be exempt from VAT and Transfer Tax. Nonetheless, the Market Share Act states that this operation IS subject to VAT or Transfer Tax if the share purchase is made in order to avoid paying taxes.
This option is very attractive when one is acquiring a marriage or two or more partners provided the property that belongs to a limited partnership.
According to the above, be aware that you should meet certain requirements in order to qualify for this exemption. In this sense, to avoid eventual risks you should be guided by a professional.
At Good Way Tax &Legal, we have a team of experts in this field who will be happy to help you by giving you the information and advice needed for commercial or private operations of our customers are conducted in the most efficient way from a tax point of view.