VAT on newly constructed homes: how much do you have to pay?
Both new construction and second-hand homes carry expenses associated with the purchase. In the case of off-plan houses, the VAT– Value Added Tax–is different from the one paid when buying second-hand houses. This article will deal with the casuistry related to the VAT on newly constructed homes or first delivery.
As can be read on the website of Tax Agency (Agencia Tributaria), by ‘first delivery’ of housing it is understood to mean those acquired from the developer when the construction or rehabilitation of the building is completed — that is, when the architect and rigger issue a certificate of purpose working.
From the Treasury, they also report an exception that must be taken into account when paying VAT: there will be no VAT to pay if the developer rented these new homes for at least two years and then sold it to a third person. In this circumstance, the owner will pay a tax on Onerous Transmissions of Patrimony because it is considered a second transmission. On other occasions, the buyer of the first delivery house must pay the VAT to the seller, who is obliged to enter the amount corresponding to the Public Treasury.
How much VAT is paid for the purchase of new construction?
The Tax Agency determines that the VAT that the buyer supports «is the result of multiplying the price of the house by the tax rate in effect at the time of purchase» – currently 10%. This means, in order to calculate the VAT that must be paid for acquiring a newly constructed home, it is sufficient to calculate 10% of the total deed amount – except in the case of public housing or official protection under the special regime, in whose case taxation is 4%.
For example: imagine we bought a flat that is not under official protection under the special regime or a public protection home. Since its not included in any of the two exceptions which qualify for the 4% tax, we should apply the general VAT rate of 10%. If the deed for this house amounts to 225,000 euros, what would be the total amount of VAT we would have to support? To find the figure, we must calculate:
225,000 euros x 0.10 = 22,500 euros of VAT
Therefore, in order to purchase their new home, the buyer must have liquidity or financing to support a total expenditure of 247,500 euros (225,000 euros of the deed amount + 22,500 euros of VAT). This doesn’t include other expenses derived from the acquisition of a first-class home, such as agency, notary or appraisal.
Source: Aedas Home