VAT Instead of ITP on New Builds
When you buy a brand-new property in Spain directly from a developer, you pay VAT (IVA, Impuesto sobre el Valor Anadido) instead of the property transfer tax (ITP). This is an important distinction because the total tax burden differs.
The key rule: if the property has never been lived in and you are buying it from the developer or builder who constructed it, VAT applies. If the property has been previously occupied (even briefly) or you are buying from a private seller, ITP applies instead.
VAT Rates on Property
The standard VAT rate on new residential property in mainland Spain is 10%. This is lower than the general VAT rate of 21% that applies to most goods and services.
- Mainland Spain (including Costa del Sol): 10% IVA
- Canary Islands: 7% IGIC (a different indirect tax, not technically IVA)
- Social housing (VPO): 4% reduced rate (super-reduced IVA)
- Commercial property, land, garages sold separately: 21% IVA
Important: Garages and Storage Rooms
Garages and storage rooms (trasteros) enjoy the reduced 10% rate only if they are sold together with the residential unit and listed on the same deed. A maximum of two garages per dwelling qualifies. If you buy an extra parking space on a separate deed, 21% VAT applies.
AJD Stamp Duty on New Builds
In addition to VAT, new-build buyers must pay AJD (Actos Juridicos Documentados), a stamp duty tax. This is the tax you pay when a public deed with a monetary value is registered. The rate varies by region:
- Andalusia: 1.2%
- Valencia: 1.5%
- Catalonia: 1.5%
- Madrid: 0.75%
- Balearic Islands: 1.2%
So the combined tax burden on a new-build property in Andalusia is 10% IVA + 1.2% AJD = 11.2%. Compare this with the 7% ITP on a resale property in the same region. New builds cost more in taxes.
New Build vs Resale: Tax Comparison
For a EUR 300,000 property in Andalusia:
- New build: EUR 30,000 IVA + EUR 3,600 AJD = EUR 33,600 in taxes
- Resale: EUR 21,000 ITP = EUR 21,000 in taxes
- Difference: EUR 12,600 more for a new build
This does not mean new builds are always more expensive overall. Developers sometimes offer competitive pricing, include furnishings, or cover certain closing costs. But you should factor in the higher tax rate when comparing.
When VAT Does Not Apply
VAT does not apply in these situations (ITP applies instead):
- The property has been previously occupied, even if just briefly
- The seller is not the original developer or builder
- A bank sells a repossessed new-build property (typically subject to ITP)
- The property is sold more than two years after completion without having been occupied (a complex area, seek legal advice)
Off-Plan Purchases: Payment Structure
When buying off-plan, you typically pay VAT in stages. You pay 10% IVA on each instalment (reservation, construction milestones, completion). The developer's invoices must show the VAT separately. At completion, you pay AJD when the deed is signed and registered.
Calculate Your New-Build Costs
New-build purchases have a different cost structure than resales. Use our free calculator to estimate your total costs for either scenario. Enter your purchase price and property type to see a detailed breakdown of all taxes and fees.