If you’ve always dreamt of owning your own home in Andalusia then now could be the perfect time to start your property hunt, thanks to a new decree approved by the Andalusian government that will see property taxes reduced for all potential home owners in the region. The two taxes that will be affected are Transfer Tax and Stamp Duty. Transfer tax, which was previously set at either 10%, 9% or 8%, depending on the value of the property, has been reduced to a flat rate of 7% for all properties. Meanwhile Stamp Duty has been reduced from 1.5% to 1.2%. This reduction is not nationwide: it is an initiative only available in Andalusia, and it will only be in place until 31st December 2021, so time is of the essence.
These reductions will make purchasing property in the region much more appealing and affordable than ever before. Here’s everything you need to know about how you could save using these new lower tax rates, in real terms:
Reducing the Cost of Purchasing a Second-Hand Property
This is great news for potential homebuyers, but particularly potential homebuyers who are interested in purchasing second-hand properties (that is, properties that have not been newly built). And clearly, the higher the value of the property you are interested in the more savings you will make on your property transfer tax. That is because, before the new decree was introduced, the amount of transfer tax you would pay was dependant on property value, and if your property was worth:
- Up to €400,000 you pay a Transfer Tax rate of 8%
- From €400,000 to €700,000 you pay a Transfer Tax rate of 9%
- From €700,000 onwards you pay a Transfer Tax rate of 10%
Now you will pay a flat transfer tax rate of 7%. This same transfer tax flat rate also applies if you decide to purchase a new build property in Spain, but a 10% VAT rate will still be applied to all new homes (this law has not changed) that is not applied to second hand homes, making these a more attractive proposition right now.
The savings that you can make as a result of these new changes are significant. To give an example, if you fall in love with a beautiful Mijas Costa villa that has a purchase price of €1,500,000 then instead of having to pay a Transfer Tax fee of €139,000, the transfer tax that you would have to pay would now be €105,000, providing you with a considerable saving of €34,000.
Stamp Duty Reduction
Also, it is not as significant a reduction as for the transfer tax, the amount of stamp duty you would have to pay on your home purchase has also been reduced. Instead of paying 1.5% you would now have to pay 1.2%. Whilst Stamp Duty doesn’t impact on resale property, it does affect new build homes, and would lead to a considerable tax change for these types of home.
Why Has the Andalusian Government Made These Temporary Changes?
There are several reasons why the Andalusian government has made the decision to lower property taxes in the region, with the most significant of these being:
- To rejuvenate the real estate sector, encouraging buyer both from within Spain and overseas to consider making the most to Andalusia, investing in the local property sector and simultaneously, the local economy.
- To recuperate taxes in an indirect way, by giving local citizens access to a higher economical capacity, with the hope that this will be expended back into the economy, ultimately.
If you’re thinking of moving to Spain, particularly to Andalusia, then there’s no time like the present. If you’re ready to turn your dream of Spanish home ownership into a reality then why not get in touch with our local property experts, who are perfectly placed to help you find the Spanish home of your dreams.