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Michael Davies from Davies Abogados/Solicitors & Barristers explains the reduction in transfer tax that was announced yesterday 28th of January by surprise and that is valid for all purchases starting 29th of January until the end of the year.

Reduction to transfer tax in Andalucía for all properties purchased by deed yesterday 28th of April 2021 until the end of the year. 

Decree-law 7/2021, of April 27, on reduction of the transfer tax and document tax  for the promotion and reactivation of the economy of the Autonomous Community of Andalusia in the face of the crisis situation generated by the pandemic of the coronavirus (COVID19

 

Specifically transfer tax on purchase of second hand properties is going from from the rate of 8%, 9% and 10% (depending on the purchase price ) to a single general rate of 7%. 

Before transfer tax on a second hand purchase was:

  • 8% for the first 400000 euro. 
  • 9% between 400000 euro and 700000 euro . 
  • 10% from 700000 euro upwards. 

Now there is one single transfer tax rate that has been fixed at 7%

Examples below of what you will save: 

  • On a property of 200000 euro you would save 2000 euro. 
  • On a property of 400000 euro euro you would save 4000 euro 
  • On a property of 1.000.000 euro you would save 19000 euro. 

The effect on new properties is much smaller as they are still subject to V.A.T. at 10% . 

With new properties the only reduction is 1,5% to 1,2% on the document tax so there is very little savings. 

 

Conclusion: 

If you are thinking about purchasing a property  or have purchased but not signed the deed yet , then you can take advantage of the reduction. 

I am now going to give a call to my clients who have purchased but not signed deeds yet  to inform them of the good news. 

Andalucia hast one of the best inheritance tax deals in Spain , it now has a lower transfer tax than most regions and above all it is best place in Spain to live .

Can I claim the reduction transfer tax rate if I signed by deed before the 28th of April but have not actually paid the tax yet?

No. I am afraid not . The deed has to be signed on or after the 28th for you to be subject to the new reduction

If I have put down a deposit and signed a contract can I claim the reduced transfer tax ?

Yes, the date that counts is the date the deed (escritura ) is signed .

why did nobody tell us that this would happen to avoid the higher amount?

This reduction has caught us all by surprise. They did not announce it to avoid a reduction in completions waiting for the reduction to happen.

What happens if I complete after the end of the year ?

Initially the reduction is only in place until the end of the year and then it will go back to the old rate of 8% , 9% or 10% depending on the price