Contenido
- A perfectly legal tax strategy
- What is the 100% supplementary tax all about?
- Why buying from a developer exempts you from the new tax
- What other transactions are exempt?
- A practical example: how to save half a million euros
- Who actually benefits from this exemption?
- Practical tips for buying without paying the surcharge
- Buying in a well-informed manner means buying with an advantage
A perfectly legal tax strategy
Amidst the debate over the new 100 per cent tax that the PSOE wishes to impose on property purchases by non-EU foreigners, there is a reality that few mention: it is indeed possible to avoid this tax burden, entirely legally, by buying directly from a property developer.
This is neither a ploy nor a loophole: it is a direct consequence of the design of the Spanish tax system. And the most interesting thing is that many foreigners are already taking advantage of this legal loophole to prevent their investment from being doubled by an extraordinary tax.
What is the 100% supplementary tax all about?
The new tax proposed by the Spanish Government is a 100 per cent surcharge on the Property Transfer Tax (ITP) for non-EU foreign buyers. Its aim, according to the PSOE, is to curb ‘speculative purchases’ that drive up prices and reduce the supply of housing for residents.
But what is really important is to understand who this tax affects:
- It applies only to second-hand property sales.
- It only affects non-EU buyers.
- It does not affect transactions subject to VAT, such as those involving new-build properties.
“The legal loophole,” adds Raquel Jurado, a researcher at the REAF’s research department, “lies in sales of new-build properties, which are not subject to this tax but to VAT. As VAT cannot be altered, all sales subject to it will be exempt from the supplementary tax.”
Source: El País
Why buying from a developer exempts you from the new tax
When you buy a new-build property directly from a property developer, the transaction is not subject to ITP, but to VAT + AJD (stamp duty). And here’s the legal loophole:
- VAT is a tax harmonised at European level. It cannot be altered or increased by local measures.
- The new supplementary tax applies only to ITP. It cannot be added to VAT.
Therefore, if you are liable for VAT, you are automatically exempt from the 100 per cent surcharge.
This makes buying a new-build property the most tax-efficient strategy for non-resident foreigners who wish to invest in property without being penalised.
What other transactions are exempt?
As well as purchases from property developers, there are other situations in which this surcharge would not apply:
- Transactions between business owners or professionals: if the seller is a business owner (even if not a property developer) and the buyer is also a business owner, they may choose to waive the VAT exemption and pay VAT instead of property transfer tax (ITP).
- New-build developments through companies: investing via a corporate structure could offer similar advantages, although it requires specialist tax advice.
“If the property is sold by a business owner who is not a property developer, the transaction would, in theory, be subject to VAT, but in practice it is exempt. And if another business owner were to buy it, they could opt out of that exemption to pay VAT and thus avoid the supplementary tax.”
Source: El País
A practical example: how to save half a million euros
Let’s look at a real-life case analysed by the General Council of Economists via the REAF:
- An American buyer purchases a property for €600,000.
- If they pay property transfer tax (ITP) on a second-hand property, they will pay 6 per cent, i.e. €36,000.
- Under the new tax, they will have to pay a further €564,000, i.e. 100 per cent of the value minus what has already been paid in ITP.
Total: €1,200,000 for a property worth €600,000.
However, if that same property is a new-build and you buy it directly from a developer:
- They will pay 10% VAT: €60,000
- You will pay 1.5% stamp duty: €9,000
Total tax: €69,000, excluding surcharges.
Savings: over €500,000.
Who actually benefits from this exemption?
Mainly, non-EU buyers who:
- Are well advised.
- Understand how different property transactions are taxed.
- Plan their investment with tax efficiency in mind.
But property developers also stand to gain: with this structure, they offer a competitive tax advantage over those selling second-hand properties.
Practical tips for buying without paying the surcharge
- Buy only new-build properties.
- Deal directly with the developer: avoid intermediaries who may make the transaction more expensive or complicated.
- Avoid buying second-hand properties, even if the price seems lower: the surcharge can double the final cost.
- Consult a tax adviser specialising in non-residents before finalising any transaction.
- Consider buying through a company if you are in business, to benefit from professional structures.
Buying in a well-informed manner means buying with an advantage
The introduction of the new supplementary tax has sparked controversy and concern, particularly amongst foreign investors. But as we have seen, there are perfectly legal ways to avoid it.
Buying directly from a developer not only allows you to avoid a potentially confiscatory surcharge, but also gives you access to new, better-equipped and brand-new properties. And most importantly: it allows you to protect your investment and maintain long-term profitability.
Today more than ever, tax knowledge is your best tool. Because in an environment where the rules change rapidly, only those who understand the system can use it to their advantage.
If you’re looking for a new-build property to invest wisely, take a look at our new-build developments by the sea.