Buying a newly built home involves the obligation to pay VAT (Value Added Tax).
A property is considered new construction when it is a single-family home, apartment, protected housing (VPO), or any other type of property purchased directly from the developer after construction has been completed, with the first handover of the keys taking place.
VAT is one of the most significant taxes involved in purchasing a new property, so it is important to understand how it works, who is responsible for paying it, and the exceptional situations in which reductions or exemptions may apply.
How Much VAT Is Paid on a New Home?
The VAT on a newly built property is generally 10% of the purchase price stated in the deed.
However, if the property is protected housing under special schemes or publicly promoted housing, the VAT rate is reduced to 4%.
As we will see later, there may also be reductions or even exemptions if certain requirements are met.
When Is VAT Paid on a New Home?
VAT on a newly built property is paid at the time the purchase deed is signed, together with the rest of the payment stipulated in the contract.
Who Pays VAT When Buying a Property?
The buyer of the newly built property is responsible for paying VAT.
Once the seller receives the amount, they are required to pay the tax to the Spanish Tax Agency (Hacienda).
VAT Exemption on New Homes
In Spain, VAT exemption when purchasing a new home may apply in certain situations, such as rent-to-own agreements (lease with option to purchase).
In these cases, VAT is applied during the rental period at a rate of 10%, since the tax is considered to be charged during the first delivery of the property, which is associated with the rental agreement that includes the option to purchase.
There are also regions with different tax systems. For example, in the Canary Islands, VAT is not applied to new property transactions, as a different tax system applies.
VAT Reductions on New Homes
There are situations where the VAT rate may be reduced from the standard 10% applied to new homes.
Below are some examples of cases where VAT reductions may apply.
VAT for Large Families
In some Autonomous Communities, large families may benefit from a VAT reduction of up to 4% when purchasing a newly built home.
Additionally, other conditions associated with large-family status may further reduce the final tax burden.
VAT for Young Buyers
Young buyers may also qualify for VAT reductions when purchasing a newly built property.
Each Autonomous Community sets its own requirements, so it is important to check whether the reduction applies to people under 30, 32, or even up to 35 years old, depending on the region.
Other Costs When Buying a New Home
In addition to VAT, purchasing a newly built property also involves other costs that should be considered, such as:
- Property appraisal fees.
- Property Registry fees.
- Notary fees.
- Administrative agency (gestoría) fees.