The Property Transfer Tax (ITP) is an indirect tax that affects property sales or rentals. The various autonomous communities are responsible for collecting the tax, so the way it is managed can vary from region to region. Nevertheless, we’ll give an overview of the meaning and application of ITP in Spain.
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What is the Property Transfer Tax?
ITP is an indirect tax levied on the equity increase after a sale. The tax also applies to the establishment of real rights, leases, bonds, promises, pensions, contract options and administrative concessions. To avoid double taxation, this tax does not apply to operations subject to value-added tax (IVA). For example, a sale will be subject to ITP when the seller is an individual but to IVA when the seller is the builder.
The tax must be paid within 30 days following the taxable event. Do not confuse ITP with the inheritance and gift tax (Impuesto de Sucesiones y Donaciones), which applies to non-consideration transactions between the living or deceased.
Who has to pay ITP?
The person who acquires the property or right is always liable for payment of this tax. For property rentals, the tenant is liable for ITP after signing the rental agreement. Landlords who do not require proof of ITP payment will become secondarily liable for the tax.
The State, the Church, the Royal Academies, the Red Cross, political parties and ONCE (the national organisation of Spanish blind people) are exempt from paying ITP.
ITP is paid by attending the Hacienda branch in the relevant autonomous community. You need to present the original and a copy of your DNI (ID card), along with the official public document or agreement (Form 600).
How is ITP calculated?
As with other taxes, ITP is calculated by setting a tax rate on a taxable base. The taxable base in this case is the real value of the transferred property or right. For example:
- A general rate of 6% is set for property transfers but the rate set by each autonomous community prevails.
- The establishment of real rights, bonds, loans and pensions are taxed at 1% on the taxable base.
- Check the rental rate set by each autonomous community.
Corporate operations and documented legal acts
Corporate operations are also subject to ITP, except for the amendment of deeds and bylaws, and capital restructures or increases charged to the share premium account.
Documented legal acts are also taxed (stamp duty). This applies to administrative, notary and commercial documents.
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