What is the Property Transfer Tax (ITP)?

If you are going to buy a second-hand home, in the estimate of the expenses of the sale you must include the Property Transfer Tax (ITP). This tax must be paid to the Treasury, and its management and collection is ceded to the Autonomous Communities, so depending on where the property is located, its nature, its value and the personal characteristics of the buyer, the amount to be paid will vary.

If you are interested in knowing a little more about what this tax consists of, then Gilmar ‘s experts will tell you all the details so that you understand in which cases you have to pay it and everything related to its settlement.

What is the Property Transfer Tax?

The norm that regulates the so-called Tax on Property Transfers and Documented Legal Acts is RDL 1/1993, of September 24, and Law 22/2009, of December 18, and although it is a single legislative text; Actually there are 3 different taxes that are levied on each one:

  • Onerous Patrimonial Transfers (TPO) , this corresponds to sales of all kinds of assets and rights between individuals that are part of the assets of a natural or legal person. This tax must be paid whenever an asset is transferred that is in Spain and if it is abroad, when the person obliged to pay has his residence in this country. In general, these transmissions, depending on the autonomous community and the deductions to be applied, are usually taxed between 4% and 10%.
  • The Corporate Operations (OS) of constitution, increase or decrease of the capital stock, merger, spin-off or dissolution of companies; and contribution of the partners to replace social losses. On the other hand, operations to modify deeds and bylaws, restructuring operations or capital increases charged to reserves for share issue premium are exempt from paying the tax. This tax must be paid by all companies with headquarters in Spain and also by foreign entities in operations carried out through branches or permanent establishments.
  • The Documented Legal Acts (AJD) collected in notarial, commercial or administrative documents formalized in Spain and those that are carried out abroad but that take effect here. This tax is also different in each autonomous community and the tax rate ranges between 0.5% and 1.5%.

When do you not have to pay Transfer Tax?

With the intention of avoiding double taxation, this tax will not have to be paid in transfers between businessmen and individuals , because these sales are already taxed by Value Added Tax (VAT). That is, in the sale of a home, VAT will be paid when the seller is the builder and Transfer Tax when the seller is an individual.

In addition, depending on its regulatory law or the autonomous community itself, the Property Transfer Tax contemplates exemptions and tax benefits depending on the circumstances of the buyer. For example, in the case of the acquisition of a first residence for young people, for the purchase of officially protected housing or for large families.

When, how and where is the Transfer Tax paid?

The obligation to pay this tax arises:

  • In Patrimonial Transfers, the day on which the act is carried out or the contract is signed. In this case, the statute of limitations is four years.
  • In Corporate Transactions and Documented Legal Acts, the day on which the act subject to encumbrance is formalized in a public deed.

The term to pay the tax is 30 days from the moment the act or contract is celebrated or formalized and for this, a self-assessment must be made through the following specific models provided by the administration:

  • Model 600 and annexes, which is the one that is generally used.
  • The Model 620, which is used for the transmission of certain used vehicles.
  • Model 630, used for the payment in cash of excess bills of exchange over 192,323.87 euros.

The person who is obliged to pay this tax must do so at the tax office of the corresponding autonomous community according to the location of the property and will have to present the corresponding self-assessment model and the original of the public documents or signed contracts.

Who pays the Property Transfer Tax?

The taxpayer of the tax, that is, the person obliged to pay, is the person whose assets are increased by the operation . Namely:

  • In the case of Property Transfers, the taxpayer is the buyer of the property, the lessee, the pensioner, etc.
  • In Corporate Transactions, the party liable for payment is the company in its constitution or in the capital increase, and the partners in cases of capital reduction or dissolution of the company.
  • And in the Documented Legal Acts, the people who request or have an interest in the issuance of notarial documents will be obliged.

In the specific case of the guarantee loan constitution deeds, until the approval of RDL 17/2018, of November 8, the person obliged to pay this tax was the one who received the loan. From that date, the taxpayer and therefore who must pay is the financial institution.

In the case of real estate sales, the person responsible for paying the Property Transfer Tax is always the buyer, while the seller pays the IRPF, which is levied on the capital gains obtained in the year of sale, if applicable.

How is the Property Transfer Tax calculated?

As with all taxes, the Transfer Tax is calculated by applying a tax rate to a tax base .

In this case, the tax base is the real value of the property or right transferred. Although there are some correction criteria, for example in the mortgage, where the liquidable base is the guaranteed capital, including interest, compensation and other concepts.

Therefore, to obtain the amount to be paid , the corresponding rate must be applied and the State establishes a general framework, but since the jurisdiction over this tax belongs to the Autonomous Communities, it will be the latter that set the tax rate.

In any case, the state minimums to apply in the most common operations are:

  • 6% for the transfer of assets, although the rate established by each Autonomous Community prevails.
  • 1% for the constitution of security rights, pensions, bonds and loans, as well as for Corporate Operations.
  • 4% in the case of transfers of personal property.

The Transfer Tax on the purchase of a home

In summary, when a home is purchased, the buyer is obliged to pay the Property Transfer Tax and to know how much this tax amounts to, the tax rate and the possibility of benefiting from tax incentives must be taken into account. determined by the regulations of the Autonomous Community in which the property is located.

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