Summary
In what cases does the ITP (Property Transfer Tax) apply when buying a home in Madrid?
The Property Transfer Tax (ITP) is mainly applied when buying a second-hand property in Madrid . That is, when it is not a new property subject to VAT.Transfer Tax (ITP) is also levied on the purchase of other real estate such as garages, storage units, or commercial premises , provided they are not linked to a new dwelling. Furthermore, this tax applies when real rights over a property are transferred , such as usufruct, bare ownership , or the right of use and habitation.
In transactions between individuals, the ITP replaces VAT, so it is key to take this into account when planning your purchase budget.
Property transfers subject to tax
- Second-hand homes: General rate of 6%.
- Independent garages or storage rooms: 6% or 8% if they exceed 30,000 euros.
- Premises or offices: 7%.
- Real rights over real estate: 7%.
Typical cases: primary residence, second-hand property, and more
The most common application of the Property Transfer Tax (ITP) in Madrid is the purchase of a second-hand primary residence. If certain requirements are met, such as the property having a value equal to or less than €250,000 and being used as the buyer's primary residence, the buyer can benefit from a 10% reduction in the tax amount, provided no other additional reduction is claimed.In each case, the applicable tax rate and possible discounts may vary, so it is important to carefully review the requirements established by the Community of Madrid.
Property Transfer Tax (ITP) rates in Madrid: general and reduced
The Property Transfer Tax (ITP) in Madrid varies depending on the type of property, its value, and the buyer's personal circumstances. It's important to know that this tax primarily applies to resale properties, while new homes are taxed through VAT, not ITP.For example, the purchase of a second-hand home is usually taxed at a general rate of 6%, although there are cases with reduced rates depending on the buyer's profile or the nature of the property.
In contrast, the VAT when buying a new home is 10% and the Stamp Duty (AJD) is 0.75%, but not the ITP.
Applicable rates depending on the type of property or buyer
Property Transfer Tax (ITP) in Madrid varies depending on the type of property and, in some cases, on the buyer's personal circumstances. These are the tax rates that are typically applied:- 6%: general rate for the purchase of second-hand homes.
- 7%: in transfers of real rights over real estate, such as usufruct or bare ownership.
- 8%: applies to the portion of the property value that exceeds 400,000 euros for homes or 30,000 euros for garages and storage rooms.
- 3.5%: reduced rate for buyers under 35 years of age or with a disability equal to or greater than 33%, provided that they acquire their main residence for a maximum amount of 130,000 euros.
- 1%: applicable to certain corporate transactions or notarial acts related to real estate.
- 0.5%: for preventive annotations of seizure.
It is important to review each specific case to determine the applicable tax type.
Tax calculation: reference value and taxable base
The ITP is calculated by applying the corresponding rate to the taxable base, which is the highest value between the purchase price, the appraisal or the cadastral reference value.Some examples in the case of a house worth 280,000 euros:
- At 6%: 280,000 x 6% = 16,800 euros
- With a reduced rate of 5%: 280,000 x 5% = 14,000 euros
The fee may be adjusted according to applicable discounts. If the reference value is higher than the declared value, the tax will be calculated on that value. The Community of Madrid provides a portal to check the updated value.
-
Are you interested in learning more about the mortgage market?
- See more articles by Josep Vera, Director of Organization and Commercial Development at UCI.
Property Transfer Tax (ITP) discounts in Madrid: young people, large families and more
Since 2019, the Community of Madrid has offered several discounts on the Property Transfer Tax (ITP) to facilitate the purchase of primary residences and benefit certain groups. Let's look at each of them.Main residence and under 35 years of age
If the property is valued at less than €250,000 and will be used as your primary residence , you can benefit from a 10% discount on the property tax. Furthermore, in these cases, you have the option of paying the property transfer tax (ITP) in three annual installments.In rural areas with fewer than 2,500 inhabitants, the Community of Madrid is offering a 100% reduction in the Property Transfer Tax (ITP) for young people under 35 who establish their permanent residence there. This measure aims to combat the depopulation of small municipalities.
Large families and people with disabilities
Large families can benefit from a reduced rate of 4% if they purchase a primary residence. This benefit is conditional upon the previous primary residence having been sold within the two years before or after the acquisition of the new one, unless it involves the purchase of an adjacent property to connect it to the current residence.Tax benefits are also available for people with a disability of 33% or more, provided the property is their primary residence. In this case, a reduced tax rate of 3.5% may apply.
Real estate companies and other special cases
When a real estate company acquires a property to add to its current assets with the aim of selling it within a maximum of three years, a reduced rate of 2% can be applied. To qualify, the purpose of resale must be justified and the timeframes required by regional regulations must be met.How to file and pay the ITP in Madrid: form 600 and deadlines
To comply with the ITP payment in Madrid when acquiring a property, it is important to follow a series of steps that ensure the correct procedure and avoid penalties:- Determining the amount of the tax: Calculate the ITP by applying the corresponding tax rate to the taxable base, which is usually the highest value between the purchase price, the appraisal value or the cadastral reference value.
- Complete Form 600: Fill out Form 600, the official form for self-assessment of the Property Transfer Tax (ITP) in Madrid. You can do this online through the Madrid Regional Government's website or in person at authorized offices.
- Submit the required documentation: Along with Form 600, you must provide documentation that justifies the transaction, such as the public deed of sale and the buyer's ID card or Foreigner's Identification Number (NIE). This is essential to verify the calculation and payment of the tax.
- Paying the tax: You can pay online, by bank transfer or direct debit, or in person at authorized banks and offices of the Community of Madrid.
- Keep proof of payment: It is vital to keep the receipt or proof that confirms the payment of the tax, as it will be necessary to register the property in the Property Registry and for any subsequent procedures.
Step-by-step presentation of the 600 model
The 600 model consists of several sections that must be completed carefully:- Identification of the liable party and the transferor: It must be indicated who buys (liable party) and who sells (transferor), with their complete personal or tax data: name, ID or CIF, address and telephone.
- Document type: Indicate whether the transaction is formalized through a notarial deed, judicial document, administrative document, or private document. If it is a notarial deed, include the notary's name, year, and protocol number.
- Description of the property or right transferred: The nature of the property (urban or rural), its use (house, garage, etc.), cadastral reference, declared value and any other identifying information must be indicated.
- Self-assessment of tax: The taxable base is calculated, any applicable tax credits are applied, the corresponding tax rate is indicated, and the final tax liability is obtained. It is also indicated here whether the transaction is exempt or subject to tax.
- Presentation details: Include the presenter's signature, the place and date of presentation, and the payment method.
The form can be downloaded from the Community of Madrid website and, if you have an electronic certificate, submitted online.
Available payment terms and methods
The deadline for paying the Property Transfer Tax (ITP) is 30 business days from the signing of the deed. Payment can be made either online through the Madrid Regional Government's tax portal or in person at participating banks.Meeting the deadline is essential to avoid penalties and late payment interest.
If you're in the process of buying a property and want to avoid unexpected tax issues, make sure you're well-informed before signing. While paying the Property Transfer Tax (ITP) isn't optional, you can at least plan ahead and, in some cases, even get a discount. At UCI, in addition to helping you with financing, we explain all the tax implications of the transaction. If you need guidance on managing the ITP, we're with you every step of the way.
