Transfer of Assets Tax in Spain (ITP) is paid by person who has acquired property where a transfer has taken place between living persons for consideration. The application of ITP is discussed below.
Process – Transfer of Assets Tax in Spain (ITP)
When a person acquires property, they have 30 business days to pay the ITP and complete Form 600 and provide it together with a copy of the deed to the Autonomous Community (first-level administrative and political divisions, most similar to States) where the property is located.
Valuation of the Property
Autonomous Communities regulate the tax rates, thus, each Autonomous Community has a different ITP tax rate, generally ranging from 6% to 10%. They also set fiscal values for real estate annually. The fiscal value may not reflect the actual value of the property. A purchaser can declare the fiscal value of the property and this will be accepted so long as the property does not have unusual features which may significantly affect the actual value of the property. Alternatively, if a person has purchased a property for a lower value than the fiscal value then the person can declare the actual value of the property. When this is done, the Tax Office may verify the declared value and there is a risk that the Tax Office may assign a higher value to the property.
Incompatible with VAT
ITP is incompatible with Value-Added Tax (VAT) thus, it is important to determine which tax rate is applicable. The applicable tax is dependent on the nature of the property. If the seller of the property is a company and the transaction takes place in the course of business, then the VAT applies. Where rustic land or second instalment buildings are transferred after their construction is completed, purchasers are then exempt from VAT and instead pay ITP.
There are benefits to ITP and VAT. The tax rate of ITP may be lower than VAT, however, the VAT paid in the course of business is recoverable via tax refund. Thus, it is preferable for companies to pay VAT. Companies and businessmen can waive the VAT exemption, prior to the transfer, by having the waiver recorded in the deed of sale. The VAT exception cannot be waived by non-entrepreneurs.
In summary, Transfer of Assets Tax in Spain is payable by persons acquiring property. Each Autonomous Community sets their own tax rates and provides annual fiscal property values. The fiscal value or actual value of the property can be declared. ITP is paid where VAT is not applicable, however businessmen and companies can waive the exemption to VAT.
Víctor Sáez
