Andalucía reduces property purchase taxes for 2021

Spanish villa: Andalucía reduces property taxes

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

Anyone buying a Spanish holiday home or moving to Southern Spain in 2021 could benefit from a temporary reduction in Andalusian stamp duty and property transfer taxes.

If you are planning to buy a property in Southern Spain, 2021 is the year to do it!

At the end of April, the Andalusian government unexpectedly announced that it was reducing the taxes applied on real estate purchases in the region. This applies whether you are looking for a full- time home, a holiday home, or to be able to apply for Spain’s Golden Visa and its residence benefits.

The ATP transfer tax has been reduced from the 8%-10% sliding scale to 7% – which can result in sizable savings – and the AJD stamp duty from 1.5% to 1.2%.

This incentive is an effort to boost the local property market, which has been hit by the Covid pandemic.

These tax reductions are excellent news, but be aware that they only apply until 31 December 2021 so you need to complete your purchase this year to benefit.

Taxes on buying property in Spain

Spain imposes three principal taxes on property purchases for private buyers, depending on whether the property has already been registered or not.

VAT (IVA in Spanish)

IVA is applied to new build properties (i.e. bought off a developer or off-plan), at a rate of 10% for residential property. There is no VAT in the Canary Islands; instead a sales tax (IGIC) of 6.5% is levied.

AJB (Impuesto sobre Actos Jurídicos Documentados)

AJB is a type of stamp duty, only applied to new build properties, at rates between 0.5% and 1.5% depending on region and circumstances.

IPT (Impuesto sobre Transmisiones Patrimoniales)

IPT is a property transfer tax levied on resale properties (i.e. where a property has already been registered). Rates vary per region and generally range between 6% and 11%.

All these taxes are paid by the buyer and are generally not included in the purchase price, so you always need to be aware of how much tax you will pay on top of the asking price.

Andalucía 2021 reductions

The usual IPT scale rates for Andalucía (up to 27 April 2021 and again from 1 January 2022) are:

Purchase price Tax rate Cumulative tax
Up to €400,000 8% €32,000
€400,000 – €700,000 9% €27,000
Over €700,000 10%

This scale is applied to all real estate (villas, apartments etc.) except garages which have a different scale.

However, the new temporary rate, applied from 28 April to 31 December 2021 is 7%, regardless of value. 

The AJB rate has also been reduced a little, from 1.5% to 1.2%.

VAT is set by the state, not at local level, so that remains 10% (21% for commercial premises and buyers).

Andalucía tax savings

Everyone buying a resale property in Andalucía benefits from considerable tax reductions this year, particularly higher value properties. Here are some examples.

Property cost Previous IPT tax cost 2021 IPT tax cost Tax saving
€200,000 €16,000 €14,000 €2,000
€500,000 €41,000 €35,000 €6,000
€750,000 €64,000 €52,500 €11,500
€1,250.000 €114,000 €87,500 €26,500

The savings on new build property are lower, since most of the cost is VAT which remains unchanged, but the AJB tax is still reduced:

Property cost Previous IPT tax cost 2021 IPT tax cost Tax saving
€200,000 €3,000 €2,400 €600
€500,000 €7,000 €6,000 €1,500
€750,000 €11,250 €9,000 €2,250
€1,250.000 €18,750 €15,000 €3,750

These tax reductions apply to property transactions signed before a public notary. They can also apply if you already own property but need to update your property registration, for example, if you’ve added a swimming pool.

The political parties in Andalucía have previously agreed a tax reform deal which should introduce a series of reductions for Andalusian taxpayers, with more expected next year. These are part of measures to stimulate economic activity by lightening the tax burden of its residents.

It is also very encouraging for those who have plans to move to Southern Spain or buy property here.

When buying a property in Spain, pay attention to the residence rules to understand if and when you become resident for tax purposes. Note that it is not just about counting days. Being resident in Spain makes you liable for Spanish tax on your worldwide income, gains and wealth and subject to the Spanish succession tax rules.

Many people worry about the tax implications of becoming resident in Spain. But with expert planning, it’s possible to structure investments and assets to be tax-efficient – and potentially pay less tax in Spain than you did in the UK, depending on your circumstances.

Ask the specialist wealth management advisers at Blevins Franks to review your investment portfolio, pensions and other assets. We can also evaluate your current tax liabilities, consider your personal situation and objectives, and look at what Spanish compliant arrangements would work for you and how much tax you could save.

Arrange to speak to your local adviser

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.