Although it may not be as familiar to you as VAT or personal income tax, it is very likely that, at some point in your life, you will have to pay the ITP (Property Transfer Tax) , especially if you are thinking of buying a second-hand flat or house .
In fact, this tax was applied last year to the vast majority of the 422,531 second-hand home sales transactions registered in Spain, according to data from the National Institute of Statistics . Do you want to know more about the ITP? At Hipotecas.com we clarify the most frequently asked questions.
What is the Property Transfer Tax?
According to the definition provided by the Tax Agency itself , the ITP is the tax that taxes "the paid and inter vivos transfers of all types of assets and rights that make up the assets of natural or legal persons , as well as the creation of real rights, loans, bonds, leases, pensions and administrative concessions."
Specifically, the ITP is regulated jointly with the Legal Documents Act in Royal Decree 828/1995, of May 29 , where the situations that give rise to the taxable event are broken down :
- Onerous property transfers: refers to the transfer of assets or assignments, such as the purchase of a vehicle from an individual, the acquisition of a second-hand home or the usufruct of a property .
- Corporate operations : these are commercial actions such as the incorporation of a company, capital increase, mergers between companies, etc.
- Documented legal acts : also applies to any act that requires notarial intervention or requires formalizing commercial documentation.
Thus, while when a person buys a new home, he or she must pay 10% VAT for this transaction - or 4% in the case of a VPO or public promotion -, if the purchase is of a second-hand property, the applicable tax will be the ITP.
Who should be responsible for the ITP?
The obligation to pay the ITP always falls on the person who obtains the right to the property , that is, if you buy a home, it will be you, as the buyer, who will have to pay the tax. The seller, on the other hand, is not subject to this tax, although he must file an Income Tax return , reporting the capital gain or loss that the sale has had on him.
However, remember that, for the ITP to apply, the transfer must be between individuals, not companies (if it is a financial institution that sells you the apartment or house, for example, it will be subject to VAT) and it must occur inter vivos , so if you receive a property by inheritance you will not have to pay this specific tax, but rather the Gift and Inheritance Tax.
How much will you pay for the ITP?
The ITP is an indirect tax whose competence is transferred to the autonomous communities , so its amount will vary significantly depending on the location of the property. In addition, there are different reductions and bonuses in each region (for large families, people under 35 years of age, people with disabilities, etc.), so the case study is very broad.
When should you pay the tax?
If you finally decide to buy a second-hand home from another private individual, you will have 30 working days from the signing of the deed of sale before a notary to present the ITP at the Tax Office of the place where the property is located (without forgetting that each autonomous community has its own procedure for regulating the liquidation) providing your ID, a copy of the public deed or the original of the sales contract, and Form 600, or the one that applies, duly completed.