The Andalusian government has extended the tax breaks introduced on buying property in the region indefinitely.
These appealing tax cuts were designed to stimulate the property market post-pandemic, but now they have turned the region into a haven, with the lowest property taxation levels in Spain (alongside Madrid).
Here's everything you need to know about these tax breaks, and how you can use them to your advantage:
What Tax Breaks Are Available?
After the property market was delivered a hammer blow by the coronavirus pandemic, in April 2021 Andalusian politicians decided to take a stand. They introduced dramatic tax relief packages for the property market which included tax cuts for those buying both new and resale properties. These included a 20% reduction in the Stamp Duty that was payable by those purchasing new properties, and the Property Transfer Tax was dropped to 7% for all resale properties: a welcome simplification of the previous rules. This is perhaps the most considerable financial tax saving for home buyers: the reduction ranges from 12.5% to 30%, depending on the sale price of the property you choose.
Why Have These Tax Breaks Been Extended?
When they were first introduced in April, the tax breaks outlined above were only for a finite period. Buyers had until 31st December 2021 to complete their transaction, in order to take advantage of this offer. However, on 20th October the Junta de Andalucia passed a new law (Law 5/2021) which makes these tax breaks permanent, meaning that this deadline no longer applies. Instead, the timescale has become indefinite.
The scope of this new law actually goes beyond the tax breaks offered on property taxes and stamp duty. They will also further cut inheritance tax, wealth tax, IRPF (personal income tax) and a wealth of other taxes within the region. The Andalusian government are clearly working hard to boost the wealth of the populous in the light of the dip suffered during the coronavirus pandemic.
How Will This Impact the Real Estate Market?
The main benefit of these changes is that all of the inhabitants of Andalucia, as well as anyone thinking of buying property there, will be afforded significantly lower taxes. Paradoxically, this has led to an increased level of economic activity in the region, and therefore increased the revenue that the local government is earning via taxation.
Andalucia has adopted a liberal fiscal policy, and so far, these has proven to be successful, particularly for the real estate market. In brief, the lower level of property tax means that more people are able to, or interested in, buying property in the region: including foreign investors. More jobs are being created: meaning that the region has more wealth: this attracts foreign investment to the region and they in turn continue to purchase property, spend income, and spread increased wealth. It’s an upward spiral, and now is the right time to get on board. There has never been a better time to purchase property in Andalucia.
How Much Money Could You Save?
If you’re thinking of buying a property in Andalucia then now is the time to invest and make big savings. If you buy a new home off plan then your Stamp Duty will be reduced by 20%, and the tax rate in the region is now a flat rate of 1.2%. The biggest savings, however, are to be had by investing in a resale property. The amount you can save here depends on the value of the property you are purchasing: the tax rate sits at a flat 7%, where is used to be between 12.5 and 30%, or more.
To put this into real terms, if you are purchasing a resale property with a value of €500,000 then you can expect to save 15% on your tax obligations. If you are purchasing a more premium property with a value of 3 million euros then you can expect to save a whopping 27% on your tax obligations. For this reason, it is not surprising that there is a huge demand for high end properties, and sales of these luxury villas are sky rocketing.
Will Spain’s New Housing Act Have an Impact?
Whilst Spain is implementing a new Housing Act, this will not have an impact on the property market in Andalucia, because the devolved government here have their own powers when it comes to housing matters. In fact, rather than have a negative effect on the Andalusian housing market, the new act means that Andalucia’s tax policies will only look more appealing to investors that might overwise be put off by the housing act. Andalucia has positioned itself as a region that welcomes investors, thanks to its low taxation status.
Now is the Perfect Time to Buy
If you’re thinking of buying property in Spain, and would like to spend as little as possible on taxes then look to Andalucia. Not only does the ultra-low taxation make the region appealing, it also offers 330 days of sunshine every year, competitive property prices (thanks to the two-pronged assault of Brexit and the coronavirus pandemic) and is in the middle of a property boom. Property is appreciating an average of 8% p.a. in coastal resorts and these growing increase in property values is only set to continue. This appreciation rises further in sought after locations such as Marbella, where property prices have risen by 30% over a two-year period.
Are you thinking of moving to Spain? Decided that now is the right time to get your foot on the Andalusian property ladder? Then why not get in touch with our locally based property experts, who are perfectly placed to help make you dream of Spanish home ownership a reality. We’re already excited to work with you!