Madrid Region to reduce Sales Tax on Resale Home Purchases

Property Tax SpainThe President of the regional government in Madrid, Ignacio González, has announced that from next year, sales tax on the purchase of a resale home in the Madrid area will be reduced from 7% to 6%. This will make Madrid the region with the lowest sales tax on resale properties in Spain. In addition, IAJD tax or Stamp Duty (payable on mortgages) is to be reduced from 1% to 0.75% which will represent an additional saving for anyone contemplating a home purchase next year.

The move was not expected with most assuming that the tax on resale properties would be increased to match the corresponding tax on new properties which attract IVA (equivalent to VAT) at 10% and which is set by the central government.

Indeed the fact that the sales tax or stamp duty payable on the purchase of resale homes varies across Spain as a result of the fact that, by Law 22/2009,  the tax is set at the autonomous community or regional level rather than by central government. According the current levels of tax levied in the autonomous communities of Spain is as per the below table:

Autonomous Community or Region

Property Tax (ITP)

IAJD (Stamp Duty)

Standard

Reduced

Standard

Reduced

Andalucía

8%-10%

2%-3.5%

1.5%

0.1% – 0.3%

Aragón

7%

1% – 4%

1%

0.1% – 0.5%

Asturias

8%-10%

3%

1.2%

0.1% – 0.3%

Balearics

8%-10%

0.5%-3.5%

1.2%

0.1% – 0.5%

Canaries

6.5%-7%

1% – 4%

0.75%

0.0% – 0.4%

Cantabria

7% – 10%

4% – 6%

1.5%

0.15% – 0.3%

Castilla La Mancha

8%

7%

1.25%

0.75%

Castilla y León

8%

8%-10%

1.5%

0.01% – 0.5%

Cataluña

10%

5% – 7%

1.5%

0.1% – 0.5%

Extremadura

8%-11%

4% – 7%

1.2%

0.1% – 0.75%

Galicia

10%

4% – 8%

1.5%

0.1% – 1.0%

La Rioja

7%

3% – 6%

1%

0.3% – 0.5%

Madrid

7%*

2% – 4%

1%*

0.1% – 0.5%

Murcia

7%

2% – 4%

1.2%

0.1% – 0.5%

Navarra

6%

1% – 5%

0.5%

N/A

Álava

6%

2.5% – 4%

0.5%

N/A

Gupúzcoa

7%

2.5% – 4%

0.5%

N/A

Vizcaya

6%

2.5% – 4%

0.5%

N/A

Valencia

10%

4%

1.2%

0.1%

 

* To be reduced to 6% and 0.75% respectively.

The rates vary typically due to the value or location of the property in the case of the standard rate and in the case of the reduced rate, the specific tax rate applied depends on the reason for which the reduced rate is being applied.

Image by Grant Cochrane

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