When purchasing a property in the Costa del Sol, many buyers deliberate between new builds and resale properties. At Prime Invest, we provide expert advice to those comparing both options or considering selling their property shortly. While the Transfer Tax, known in Spanish as “Impuesto sobre Transmisiones Patrimoniales” (ITP), applies to resold properties, understanding its implications is crucial for making informed decisions. Understanding how it operates enables buyers to compare tax liabilities and anticipate costs more effectively.
In this article, we address common questions about ITP in real estate transactions: how it's calculated, when it's due, and in which scenarios it applies, with a practical focus aimed at buyers and investors seeking secure transactions in the Costa del Sol. Let's get started!
What is the property transfer tax or ITP?
When purchasing a property that has previously been owned by another individual or entity, in addition to the agreed purchase price, other associated costs must be paid. In this context, ITP is a tax delegated to the Autonomous Communities that levies charges on onerous property transfers, such as the purchase of second-hand real estate, corporate property transactions, and other documented legal acts.
If you're purchasing a property directly from the developer and it is newly constructed, as is the case with most of our new build developments, ITP doesn’t apply. Instead, VAT (Value Added Tax) and AJD (Stamp Duty) are applicable.
However, understanding how ITP works is essential for investors comparing new builds with resale properties or for those planning to sell their property in the future.
What are the ITP rates applicable to real estate in Andalusia?
Since 2021, Andalusia has simplified the ITP rate structure for second-hand property transactions:
- The standard flat rate for real estate in Andalusia is 7 % of the transfer value of the property.
However, reduced rates apply in certain cases:
- 6 % when the property is intended as the buyer’s primary residence and its value does not exceed €150,000.
- 3.5 % when the property is intended as the buyer’s primary residence, its value does not exceed €150,000, and the buyer is under 35 years old, a victim of domestic violence or terrorism, or the property is located in a municipality facing depopulation issues.
It is important to consult a specialist advisor to confirm whether any of these reduced rates may apply.
How is ITP calculated in second-hand property transactions in Spain?
An important consideration for buyers evaluating second-hand properties is that the ITP base is determined by the property's actual value, which may differ from the agreed purchase price between buyer and seller.
The Tax Agency of Spain may apply the cadastral reference value, a system designed to prevent transactions below market value. If this reference value exceeds the agreed price, ITP will be calculated based on the higher value. Conversely, if the agreed price is higher, the ITP will be calculated on that amount.
In essence, the ITP is calculated based on the higher value between the property's sale price and its cadastral reference value. Therefore, we always recommend seeking legal and tax advice when purchasing a resale property in Andalusia.
What if ITP is not paid on time?
In Andalusia, the general deadline for ITP payment is 30 working days from the moment the taxable event occurs. Failure to pay within this period exposes the buyer to charges, late interest, and potential penalties.
Consequently, even if purchasing a second-hand property without a developer's intermediary, it's crucial to plan this payment, especially if managing other expenses like mortgages, renovations, or moving costs.
Prime Invest: Experts in property marketing and comprehensive support
At Prime Invest, we don't just sell new build properties; we assist developers in increasing sales rates and enhancing efficiency. We are a marketing and sales agency that connects developments with the right audience.
We are well-versed in the taxes affecting property transactions in Andalusia, whether it's ITP for second-hand properties or VAT and Stamp Duty for new builds. Our experience in the Costa del Sol allows us to anticipate questions, provide solutions, and offer peace of mind to developers and buyers alike.
If you're interested in exploring our new build developments on the Costa del Sol, get in touch with us! We accompany you in the purchasing decision beyond the property itself. Whether you're a developer, investor, or end buyer, we provide you with our market knowledge.
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