Purchasing a property is without a doubt the most important economic decision you’ll ever have to make. This is so much so that buyers devote almost 30% of their salary to paying the mortgage. So, for those of you thinking of taking the plunge, we have decided to comment what taxes are paid when buying a house.
First of all you have to take into account whether the property you wish to buy is new or a re-sale. Although you’ll have to pay tax in both cases, you need to know who you have to pay.
What is important to know when buying a house?
In addition to VAT, new properties are also subject to stamp duty, a tax generated when signing the property deeds at the notary public’s office and registering the property in the Property Register. The stamp duty rate in Catalonia is 1.5% of the property price before tax and is payable to the Government of Catalonia. Meanwhile the VAT rate is 10% and this amount is payable to the developer, who will then transfer the money to the Spanish inland revenue.
One specific aspect to be taken into account in the case of a new property is related to parking places. If the parking place is associated with the property when you make the purchase, the VAT rate will be 10%. However, if you make the purchase separately, you’ll have to pay 21% VAT.
You can purchase up to two parking places at the reduced rate of 10% as long as they are associated with the property. A third parking place would be subject to the 21% VAT rate even if it is in the same building as the property and purchased at the same time.
If you are considering buying a re-sale property, if it has exchanged hands at least twice you will only have to pay the Property Transfer Tax (PTT). The PTT rate is 10% and in the case of Catalonia this amount is payable, within one month of the purchase, to the Government of Catalonia.
Parking places transferred for at least the second time are also subject to the 10% PTT rate.
In the case of PTT, there are several cases in which a reduced rate may be applied:
*Transfer of a property that will be the habitual residence of a young person: 5% PTT. The person must be 32 years old or under and their taxable income from the previous year must be less than €30,000.
*Transfer of a property that will be the habitual residence of a person with a physical, mental or sensory impairment: 5% PTT. Their degree of impairment, accredited with an ICASS (Catalan Institute for Social Assistance and Service) certificate, must be at least 65%, and their taxable income from the previous year must be less than €30,000.
*In the case of public subsidised housing, the PTT rate is 7%.
If you also have to get a mortgage, we’ll explain how to go about that in the next entry!
Lluís Riquelme i Zurita
Economist
Association of Economists of Catalonia (CEC) member no. 11452
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