Each time a property is transferred from one person (physical or legal) to another, the transaction attracts an Impuesto Sobre Transmisión de Patrimonio (I.T.P.). Or, in English, Tax on the Transfer of Wealth.
This tax is payable by the buyer and is levied by the Autonomous Region level of government. In the case of Andalucia it is the Junta de Andalucia who levies it. On 31st December 2011, when everyone was out celebrating the coming of the New Year, the Junta quietly raised the level of taxation, in particular for more expensive properties. Current rates are shown in the table below:
The tax is levied on the declared purchase price, i.e. the price set out in the escritura (title deed).
Here are two examples of the tax payable:
Example One: Cortijo sold at €159.000. Tax at 8% x €159.000 = €12.720.
Example Two: Finca sold at €880.000. Tax at 8% x €400.000 + 9% x €300.000 + 10% x €180.000 = €77.000 (an average of 8.75%).
There is a legitimate way to reduce at least some of this tax!
If the property you are buying includes furniture or equipment of any sort, it is highly advisable to make a separate contract for this element, which will then reduce the amount declared in the escritura and, consequently, the tax payable.
Purchases of furniture and other moveables are taxable but attract tax at the lower rate of 4%.
Furthermore, contracts for sale of moveable goods such as this are not required to be notarized or registered. Clearly, valuations must be reasonable and take into account the true value of the goods acquired, but it makes sense to separate the two elements if you are acquiring anything in addition to the physical structure of the building.
Author: Allan Hilder
Source: Junta de Andalucía: Consejería de Hacienda y Administración Pública.