The Property Transfer Tax, in Spanish, Impuesto de Transmisiones Patrimoniales (ITP) is set at the autonomous community level. This tax charges transfers of a wide range of immovable and movable goods, which must generally be accomplished through formal legal acts, such as the public deed of sale of a property, the deed of formalization of a mortgage, or a public deed for capital stock increase, in a firm. In real estate markets, ITP applies to purchases of second-hand properties, rental contracts and transmissions of any other property rights. Previously, the fixed rates were 8%, 9% and 10%, depending on the taxable base and now, due to the decree-law of the Andalusian government, applicable from April 28th to December 31st of 2021, the ITP was reduced to the unique rate of 7%.
Through these tax changes, buyers of second-hand properties will be able to save great amounts of money. Until now, the ITP was progressive in the application of tax brackets. For instance, for a property of €1.500.000, the first 400.000€ were so far charged at 8%, whereas the remaining amount was split across the next two tax brackets and charged at the appropriate percentage. The following tables show the ITP rates that were applied until now:
With the reduction of the ITP to the unique tax rate of 7%, the tax expense will be down to €105.000: a total saving of €34.000.
Along with the ITP review, the authorities decreed a rate cut in the Tax on Documented Legal Acts, in spanish, Impuesto sobre Actos Jurídicos Documentados (AJD). The single tax rate of AJD is now reduced from 1,5% to 1,2%. Also known as Mortgage tax, the AJD charges any deed made public before a notary, encompassing the legalization of all types of notarial, commercial and administrative documents.
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Through these reduced taxes, the Andalusian Government is aiming for two different goals. On the one hand, these measures will boost the reactivation of the second-home real estate market, but on the other, they will encourage the supply of new construction at more affordable prices, by reducing the fiscal costs levied by the AJD tax. In fact, the ultimate purpose is to alleviate the tax burden on access to housing in general.
The Andalusian Government adopts this decree-law following the same course of action as the Governing Council, which had already approved urgent measures to alleviate the crisis situation generated by the pandemic. The Government’s main objective is to continue implementing support measures in the economic sector to reduce the consequences for people in Andalusia.
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