How to calculate the Property Transfer Tax in 2024
Understanding the taxation of each commercial transaction we conduct is essential to ensure compliance with legal requirements. In this article, we analyze how the Property Transfer Tax (ITP) of a home is calculated, the amount that must be paid, who is responsible for paying it, and who is exempt, among other aspects.
What is ITP?
The Property Transfer Tax (ITP) is a tax levied on the purchase and sale of used homes, vehicles, and/or capital increases. It is paid to the tax office of each Autonomous Community when a commercial transaction involving the purchase and sale of movable or immovable property occurs. For homes, this is done by submitting form 600.
The ITP is an indirect tax, applied to the transaction and its value. This legislation encompasses three different taxes: Onerous Property Transactions (TPO), Corporate Operations (OS), and Documented Legal Acts (ADJ). In this article, we will focus on Onerous Property Transactions.
Which Transactions are Subject to ITP?
In Spain, the main transactions subject to the Property Transfer Tax (ITP) are:
- Buying and Selling Second-Hand Homes: When a used home is purchased between individuals, the transaction is subject to ITP and not VAT.
- Rental of Housing: This includes seasonal rentals, such as student flats.
- Sale of Used Vehicles: When used vehicles are sold between individuals, the transaction is subject to ITP unless the vehicle is acquired for subsequent resale, in which case it would be exempt.
- Corporate Operations: Some transactions carried out by companies may also be subject to ITP under the "Corporate Operations" category.
How to Calculate the Property Transfer Tax (ITP)?
The amount of ITP varies across Spain's Autonomous Communities, and the tax is collected by the Treasury office of the Community where the acquired property is located.
To calculate the ITP for a home, it is necessary to consider the changes implemented on July 10, 2021, in Law 11/2021, which aimed to prevent and combat tax fraud. This law changed the taxable base from the real value to the Cadastral reference value, which is equivalent to the market value.
Previously, undervaluation was common to reduce tax payments. Now, the taxable base is determined by the market value of the property, as assessed by the General Directorate of Cadastre, ensuring it aligns with the market value.
To calculate the ITP for a home, consider the following points:
- General Rate: 4%
- Homes up to €400,000: 8%
- Homes up to €700,000: 9%
- Homes over €700,000: 10%
For parking spaces, the following rates apply:
- Up to €30,000: 8%
- Up to €50,000: 9%
- Over €50,000: 10%
These percentages can vary by Autonomous Community. Some communities may apply different rates, such as 8.5% or 9.5%, for certain value ranges. To determine the exact rate applicable in a specific Community, you can use an ITP calculator. This simple simulator requires you to input the property value and the Autonomous Community where it is located.
Example of How the ITP of a Home is Calculated
To calculate the ITP for a home, the first step is to determine the property's value as assessed by the General Directorate of Cadastre. The ITP is based on the higher value between the cadastral reference value and the value recorded in the deed.
Once the tax base value is established, the ITP is calculated by applying the relevant rate. For instance, if you are purchasing a second-hand property in Murcia with a cadastral reference value of €100,000, the ITP calculation will be €8,000, as 8% of the reference value is applied.
It is important to note that the tax base does not have deductions. Only charges that reduce the real value of the assets may be deductible.
When is the ITP Paid When Buying a Home?
The ITP must be paid before the public deed of sale is signed. It is crucial for the buyer to be aware of this tax and include it in their budget when planning the home purchase.
The buyer must file a declaration with the Tax Authority of the Autonomous Community where the property is located. This is done using Form 600, which details the transaction and is submitted along with the payment.
The deadline for paying the ITP is 30 business days from the date of the deed of sale. Failure to meet this deadline may result in surcharges and interest.
In What Situations Does the ITP Exemption Apply?
There are several common situations where a person or company may be exempt from paying the ITP:
- Transfers Between Spouses: In cases of separation and divorce, when there is a transfer of assets or rights between spouses or de facto partners, an exemption from the ITP can be requested.
- Inheritances and Donations: Depending on the relevant legislation, there may be an exemption or reduction of the ITP rate.
- Operations Carried Out by the State, Public Administrations, Social Security, and Non-Profit Entities: These entities are typically exempt from paying the ITP.
- Transfers of Assets or Rights in Payment of Judicially Recognized Compensation: Exemptions can be applied in these scenarios.
Who Has to Pay the ITP?
The ITP must be paid by the natural or legal person who purchases a second-hand home (transactions involving first-hand homes are subject to VAT).
- For Purchases: The buyer is responsible for paying the ITP.
- For Rentals: The tenant is responsible for paying the ITP.
