The Generalitat Valenciana, the government in Costa Blanca, recently approved a series of fiscal and organisational reforms that will have a direct impact on property investors and second residence owners. These measures, enshrined in the Ley 5/2025 and published in the Diari Oficial de la Generalitat Valenciana, take effect from 2025, with some phased introductions in 2026 and 2027. This article discusses the main tax cuts in Costa Blanca for property investors.
Below we explain the main reforms relevant to those who own or plan to buy property in the Comunidad Valenciana (Costa Blanca North and South).
1. Reduction in transfer tax (ITPAJD)
The transfer tax (Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados) is undergoing some sweeping changes that will particularly benefit buyers of existing homes and investors in strategic projects.
Resale transactions (ITP)
- General tariff drops from 10 % to 9 %, with effect from 1 June 2026.
- Luxury property (value above €1 million) continues to be taxed at the current rate of 11 %.
- New agricultural rate of 4 % for the purchase of agricultural land by professional farmers affiliated to social security (RETA), provided the agricultural activity is continued for at least five years.
New construction (AJD)
- Base rate drops from 1.5 % to 1.4 %, also from 1 June 2026.
- 50 % discount on AJD In real estate transactions recognised as strategic investment project (PIA), with effect from 1 June 2025. This is particularly interesting for large development projects or sustainable initiatives recognised by the government.
VAT, which is regulated nationally, remains 10 per cent on new construction.
You can read more about purchase costs in Costa Blanca here.
2. Reduction of inheritance and gift tax
The inheritance and gift tax reform (Impuesto sobre Sucesiones y Donaciones) makes it more attractive to transfer property or assets to second- and third-degree relatives - such as brothers, sisters, uncles, aunts and cousins.
- From 1 June 2026: a discount of 25 % on the tax due.
- From 1 June 2027: the discount rises to 50 %.
The current 99 per cent reductions for the straight line remain in force.
This reform is similar to what has been in place for some time in regions such as Madrid and Murcia, and is particularly relevant for families with multiple heirs or owner structures with ancillary relationships. Investing in a property on the Costa Blanca thus also becomes fiscally attractive for wider family circles.
Read more about inheritance and gift tax in Costa Blanca here.
3. Increase in exemption on wealth tax
The wealth tax (Impuesto sobre el Patrimonio) is undergoing significant relaxation that will benefit residents and non-residents alike.
- Exemption rises from €500,000 to €1,000,000, with retroactive effect to 31 December 2025.
- This increase applies to all taxpayers in the region, including non-residents owning only real estate in Comunidad Valenciana.
Compared to other autonomous regions - where the exemption is often around €700,000 - this measure favours (foreign) second residence owners. Regions such as the Balearic Islands or Murcia have higher thresholds, but this reform positions the Comunidad Valenciana as a competitive and attractive location to hold property.
Read more about wealth tax in Spain here.
Conclusion
For second-home owners or prospective buyers, these measures mean lower charges on purchase, more flexible inheritance and gift schemes and a wider exemption on assets.
Whether you own a property on the Costa Blanca, or are making plans to invest in Spanish real estate, these reforms can make a significant difference to your tax planning. Get timely advice on the concrete application in your personal situation.
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