EDITORIAL |
What taxes are to be paid when buying a second hand property?
When buying a property, what you have to pay varies if the property is new or not. If the property is second hand, the tax to be paid is the ITP, Impuesto sobre Transmisiones Patrimoniales.
The taxable base (amount on which the tax is calculated) from January 2022 is constituted by the cadastral reference value, which is published in the electronic headquarters of the Cadastre. This is a theoretical value of the price of the property, which is different from the cadastral value, and which does not have to coincide with what we will actually pay for the property. The real value of the property is substituted by the reference value shown in the Cadastre. We must not confuse the cadastral value, which takes into account the location of the property, the state, the age, etc., with the market reference value, which is calculated from the real estate transactions carried out before a notary in the area where the property is located. Although the problem, which many buyers currently encounter, is that the reference value does not take into account the age or condition of the property, and the location of the property in some are very broad samples, and is not limited only to purchases and sales of the same building or building with similar age, condition and characteristics. This supposes a risk, since it can exceed the theoretical value to the real one, implying a greater payment of taxes, in which case, the taxpayer will have to demonstrate that the value of the property is lower than the cadastral reference value. The burden of proof is on the taxpayer, which in this case is the purchaser.
The ITP is an autonomous tax that varies from 4 to 10% depending on the autonomous community. Where the lowest percentages are associated to special conditions such as being a large family or having a handicap equal or superior to 33% among others, assuming that the acquisition is of a habitual residence. However, the normal range is between 7% and 10%.
In the event that it is a professional instead of a private individual who acquires the used property, he/she may choose to pay VAT instead of ITP. Normally the VAT payment is higher than the ITP, but you will be able to deduct it totally or partially.
If the purchase price of the property is higher than the reference value, you will have to pay the tax based on the purchase price, because it is of higher value.
How to proceed to challenge the reference value if it is higher than the real value of the property?
There are two ways to proceed;
1- Pay the tax determined by the cadastre and request a later challenge.
2- Pay the tax based on the real value of the property and appeal the reference value and the liquidation.