ITP, the unknown tax

We all have to deal with taxes, in order to contribute to the social welfare of the health care system. And a country like Spain has many types of taxes, some are known to everyone, some are lesser-known.

Today, this article by ShMadrid will focus on the Impuesto de Transmisiones Patrimoniales or ITP (Property Transfer Tax). This is a tax we forget most of the time until we are confronted with it…

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ITP, not clear for everyone

What is ITP?

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ITP is a tax that is imposed on second-hand purchases, for example, a car, house or rental home. It also refers to an increase or decrease of a company’s capital, as well as a tax on legal transactions, like the public deeds of the sale of a house, or the formalization of a mortgage deed.

Who pays for this tax?

ITP is a state tax that is handled by each of the Autonomous Communities, so it is paid at the Tax Office of your corresponding community. There is a deadline for paying ITP, and this is 30 days from the day you purchased a property or signed the deed.

In case of a rental home, the tenant (Article 8.f) is responsible for paying this tax, although the landlord remains liable if he has received the first monthly rent without requiring the tenant to pay for this tax, according to Article 9 of La Ley del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados (the revised text of the Law on Transfer Tax and Stamp Duty).

How is this tax calculated?

The calculation of the Property Transfer Tax varies according to the specific operation that needs to be taxed. Basically, the tax rate is different for each operation, although the taxable base can also change. The other aspect that influences the way the tax is calculated, is the jurisdiction of the Autonomous Communities where the property is located.

This tax is based on income, and only transactions between individuals are subject to it. Therefore, there is no need for a settlement when it concerns leases that are subject to VAT.

When and how is the tax settled?

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The tax must be paid within a maximum period of one month from the date the contract is signed and by means of self-assessment (Model 600).

The general ITP rate is set at 6%, but it all depends on the region you are in, so it can change substantially depending on your specific area:

Andalusia: It depends on whether you buy a house, garage or premises. If the property is worth less than 400,000 euros, you would pay 8%, but it could be up to 10%. There is a reduced rate of 3.5% if the person who buys a house (to live in) is younger than 35 years old or disabled, and he should also meet certain requirements.
Aragon: The general rate is 7%, and there is a reduced rate for large families if certain requirements are met.
Asturias: The rate is very similar to Andalusia. It depends on the value of the property. It could be 8%, 9% or 10%. Discounts are possible for social housing or the transfer of a business.
Canary Islands: The general rate is 7%, and there is a discount for large families, for people under the age of 35 and for social housing.
Castilla La Mancha: A general rate of 8%, with discounted rates of 7% and 4%.
Catalonia: The general rate is 10%, and there is also a discount.
Extremadura: 8%, 9% or 10%, depending on the value of the property.
Galicia: The tax rate was raised to 10%.
Madrid: The general rate is 6%, but discounts are possible.
La Rioja: The general rate is 7%.
Valencia: The general rate is 8%.