Changes regarding the Property transfer Tax and VAT


Property Law and Tax Issues

  The Property Transfer Tax applies GENERALLY to property transactions between individuals, as well as to certain transactions between business owners. In the Balearic Islands the fixed general rate until 30.04.2012 was 7% . From 1.5.2012 a progressive scale ranging from 7% to 10% has been in use (7% to 8% for garages). As from the 1.1.2013 the Property Transfer Tax will be increased with the application of a new scale that goes from 8% to 10% (8% to 9% for garages). WITH REGARDS TO VAT (IVA) This is the tax applied to property transfers carried out by business owners. Until 31.12.12 the applicable rate of IVA for the transmission of finished properties was 4%. From the 1.1.2013 on, properties subject to IVA (new, completed homes handed over by the developer) will pay a reduced IVA rate of 10%. The rest of property transmissions liable to IVA (plots, locals, industrial buildings, garages transmitted separately, etc. will pay the general IVA rate of 21%. Normally, the purchaser would pay the IVA to the vendor (business owner). However, we must consider that within this kind of transmission, since 31/10/2012, and since approval of the Law 7/2012, the number of cases of reversal of the taxable person, by which the purchaser must declare/ pay the IVA to the Treasury (Hacienda) have increased: dation in payment of mortgage, purchases with subrogation of mortgage, purchase by which the purchaser forgoes the exemption of IVA, etc. Whenever an IVA-liable transmission be formalized through public deeds in the Balearics, it will be mandatory to pay STAMP DUTY to the Balearic Treasury (Hacienda de Baleares) at a general rate of 1,2% since 1.1.2013 (before this date it was 1%).

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