If you purchase a property from a developer, that is to say, a new construction, the sale, as with all other usual business operations, is subject to Value Added Tax (VAT) at a rate of 7% on the registered price. As it is the first sale, the purchaser will pay this amount directly to the vendor, who will subsequently pay it to the Inland Revenue. In the Canary Islands VAT does not exist; the tax to be paid is the IGIC (General Indirect Canary Islands Tax) at a rate of 5%.
If, in addition to the property, you purchase a maximum of two garage parking spaces and storage rooms, the applicable VAT rate will be the same. However, if the purchase of the parking space is undertaken separately or subsequently, the applicable VAT rate is 16%. Professionals or businessmen may also purchase new properties to develop them for business activities under the same conditions as private individuals. Although in some cases, VAT may be applied at the general rate (16%), if the property is not considered to be a residential property, such as ground floor commercial premises and some types of mezzanine.
In addition the purchaser will have to pay the Stamp Duty (Impuesto de Actos Jurídicos Documentados) corresponding to the Autonomous Regions. The amount to be paid is between 0.5% and 1% of the sale price, unless it is a state subsidised development (Vivienda de Protección Oficial or VPO) as these developments are exempt from this tax.
In the case of second or subsequent sales, the operation is subject to the Tax on Capital Transfer (Impuesto de Transmisions Patrimoniales or ITP), which, depending on the Autonomous Region in which the property is located, is charged at between 6 and 7% on the purchase price, which is the value declared in the deed without prejudice to possible Inland Revenue investigations. The obligation to pay this tax corresponds to the purchaser, who must fill in the payment form, calculate the amount and pay it within a period of 30 working days from the signature of the deed. The tax is to be paid in the administrative offices of the Inland Revenue in the corresponding Autonomous Region. This payment may also be undertaken by a notary or a recognised agency working on your behalf. If the sale has an associated mortgage, it will normally be the mortgage-issuing entity that is responsible for the payment of taxes by means of the provision of funds facilitated by the purchaser.
Depending on the agreement that you have reached with the vendor, in addition to the aforementioned taxes, there is a municipal tax called the "Plusvalia" or Tax on the Increase in Value of the Urban Land (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana). It is levied in accordance with the revaluation of the property compared to the previous sale. The value increase is calculated by taking into the account the cadastral value and the time period since the previous transfer. However, to find out the exact amount you have to ask the corresponding local council, which is the entity that sets and applies this tax.
In both cases, if you have requested a mortgage loan, the deed is subject to Stamp Duty (Impuesto de Actos Jurídicos Documentados) at a rate of between 0.5% and 1%, depending on the Autonomous Region, of the total amount of the mortgage responsibility, that is to say, not just the loaned amount but on said amount, interest and execution costs.
