01 Sep 14 guidelines about the current new super-reduced 4% VAT rate advantage on real estate acquisitions in Spain
An entrepreneur or professional must deliver the house. If that is not the case, the applicable tax will be Transfer Tax, or Impuesto de Transmisiones Patrimoniales (actually 8%).
They have to be finished houses on first delivery (accomplished by the developer). In case of second or later transfer (used homes) the applicable tax is Transfer Tax, or Impuesto de Transmisiones Patrimoniales (actually 8%).
It is necessary that the building or fraction of it subject to be transferred is suitable for home use; parking places, for a maximum of two units, and annexes are included when they are delivered jointly with the house.
Business premises are not included as annexes to houses even if they are transferred jointly with those.
Buildings destined to demolishing are not considered to be suitable for home use.
The house’s delivery must be completed within a term running from August 20, 2011 to December 31, 2011.
2. Is the 4% super-reduced tax rate applicable to transfers of used homes according to Real Decreto-ley 9/2011?
Only in case the seller renounces to the existing VAT exemption and the buyer is an entrepreneur or professional with sufficient right to deduct the totality of VAT paid on such operation. It is not applicable in cases of houses acquired just by individuals.
3. Are newly built homes delivered by developers always reputed as first delivery?
Not necessarily. In what refers to VAT it is not a first delivery the one performed by a developer after two or more years on uninterrupted use of the real estate property by its proprietor or by third parties (lessees, and similar) except for the case that the acquirer is the one who used the house for such term. In those cases the sale will be considered as second delivery, exempted of VAT and subject to Transfer Tax, or Impuesto de Transmisiones Patrimoniales (actually 8%).
4. Can the delivery of rehabilitated houses be considered as first delivery?
Yes, the delivery of rehabilitated houses is equal to the one of a newly built building as long as the following requisites are complied to:
a) More than 50% of the rehabilitation total cost is for mending or construction of structural elements, facades or roofs .
b) The total cost of the rehabilitation works is more than 25% of the building’s price of acquisition (if the house is acquired within the maximum term of two years prior to the date the rehabilitation works started) or of the real market value the property had before the rehabilitation, in both cases the land value is to be excluded.
The tax rate applicable to this delivery shall be 4% if it takes place within the term running between August 20, 2011 and December 31, 2011.
5. Is the super-reduced 4% tax rate applicable to homes intended for demolishing?
No. Even though the property’s delivery shall be subject to VAT, the applicable tax rate shall then be 18% since they are not buildings suitable to be used as homes.
6. Is the super-reduced 4% tax rate applicable to homes being still under construction?
No. When the delivery’s object is a house under construction and therefore the acquirer must proceed to finish it, the applicable tax rate shall in all cases be 18%.
7. When can a building be considered as suitable to be used for home living?
When it has a proper first occupation License and, in an objective manner, is able to be used for home living regardless the final use the acquirer makes of it.
8. Must the house be destined to be the buyer’s permanent home in order for the acquisition to be eligible for 4% super-reduced tax rate?
No. The super-reduced 4% tax rate is applied on the basis of the following objective circumstance: The building being suitable for home living use, regardless the final uses the acquirer makes of it.
9. Is the 4% super-reduced tax rate applicable to the delivery of a house to be used as an office?
Yes, as long as the property has a proper first occupation license and, in an objective way, is suitable to be used as home for living.
10. What elements are to be considered as annexes being transferred jointly with a house?
Annexes include, amongst others, parking places, cellars, attics, storerooms, stairs, sport fields, gardens, swimming pools, and common areas in the plot being transferred jointly with the house.
In order for the 4% super-reduced tax rate to be applicable to parking places (for a maximum number of two) and to any other annexes of a house, these must be transferred jointly with said house, and they must be situated in the same plot the house or building they belong to is situated in.
In case of single-family homes, the accessory land cannot exceed of 5,000 square meters.
Business premises are not to be considered as home’s annexes, even if they are transferred jointly with buildings, or part of these, that are suitable for home living.
11. Is the super-reduced 4% tax rate applicable to three parking places being transferred jointly with a house?
No. The super-reduced 4% tax rate shall be applicable to the first and second ones and a normal 18% tax rate shall be applicable to the third one.
12. If on one sale’s deed the acquirer gets a house being sold by individual owners plus a parking place being directly transferred by the developer, what is the tax rate applicable to the parking place’s acquisition?
The applicable tax rate is 18% since the delivery of the house being transferred in the same deed is not subject to VAT but to the Transfer tax due to it being a sale between individual persons.
13. When is the VAT of a house’s delivery accrued?
The VAT in a house’s delivery is, as a general rule, accrued at the time when such house is handed over to the acquirer. If an Escritura (Public sale’s deed) has been signed, then the time of handing over is the date such Escritura is granted. In case that the Escritura states or clearly indicates that the delivery’s time is a different one, then the accruing time shall be the one at which the house’s effective handing over to the acquirer is produced.
14. In what refers to advanced partial price’s payments made prior to August 20, 2011 on houses being acquired within the term running from August 20, 2011 to December 31, 2011 subject to super-reduced 4% tax rate, should the precedent 8% tax rate applied to advanced payments be rectified?
No. The Law says that the tax rate applicable to each operation shall be the one existing at the time the tax is accrued.
In case of advanced partial payments, the tax is accrued at the time when the payments are accomplished and therefore, if the payments where done before August 20, 2011, then the tax rate shall be 8% and the VAT rate applicable to the balance is 4% since the tax to such remainder is accrued at the time of the Escritura.