When buying a new build in Spain or buying on plan, you pay 10% of VAT. There is also a stamp duty (AJD) of 1.2, 1.5 or 2% on the purchase price excluding VAT, depending on the autonomous region. However, you need to watch out for the VAT rate for subsequent additional works or extras. Therefore, this article explains more about VAT on new builds in Spain.
When do you pay 10% VAT?
In principle, you pay 10% VAT + the stamp duty on any new build property or when buying on plan located in mainland Spain and the Balearic Islands. In the Canary Islands, there is no VAT, but there is a similar system: the IGIC. This article is limited to VAT.
What about additional work or extras?
It is also the general rule that you pay 10% VAT + stamp duty on any additional work or any extras ordered after the conclusion of the purchase contract. However, if the total cost of the installation or materials exceeds 40% of the total cost of the work, the VAT rate is 21%. The type example is an air-conditioning installation.
It is also important to note that any additional works or extras you order after the execution of the sale deed will be taxed at 21% VAT. The same applies to additional works or extras you order from a party other than the promoter. It is therefore advisable to include these works at once in the deed of sale.
An example. You buy a new-build property of EUR 200,000.00 excluding VAT in Alicante. The applicable VAT rate is 10%. The stamp duty is 1.50%. In total, a cost of EUR 23,000.00. You decide to also include a pergola and a swimming pool worth 35,000.00 EUR. If you include these works in the deed, and are therefore delivered by the promoter, you will also pay 10% VAT on these + a stamp duty of 1.50%. Cost: €4,025.00. However, if these works are delivered after the execution of the deed or by a party other than the promoter, you will pay 21% VAT. The cost price is then EUR 7,350.00.
What about a garage or car park?
A garage or a parking space usually have a separate entry in the registry office and land register. They are therefore separate immovable property, in addition to the dwelling. If you buy a new-build garage or pitch without a dwelling, the general rate of 21% VAT + stamp duty will apply. However, the usual scenario is that you buy a garage or pitch together with the new-build home. In that case, the VAT rate of 10% + stamp duty is applicable provided both the house and the pitch are included in the same deed.
Again, there is an exception to this. A maximum of two garages or pitches can be sold at the VAT rate of 10%. A third garage or pitch will thus fall under the 21% VAT rate.
Decision: VAT on new construction in Spain.
If you are considering ordering additional works when buying a new building or if you want a pitch or garage, it is advisable to include these points in the deed of purchase of the property. That way, you will enjoy the reduced VAT rate of 10%.