Before we buy a house, we have to know all the expenses we’re going to meet. Recently we described the taxes to be paid when buying a house and among them we talked about the VAT. Today we´ll go deeper into this issue so that you are well informed and do not get caught by surprise.
What is VAT Tax?
VAT is an acronym of “Value Added Tax”. This is an indirect tax which taxes the consumption of goods and services by both companies and individuals. In the case of a property, this type of tax is only applicable to the new build properties and not to the second-hand ones.
What is a New Build Property?
New build homes are purchased directly from the developer. In other words, the purchase is usually made between the developer as a seller and the end user as a buyer. And what about the VAT if that property has been rented out by the developer before? The VAT will not have to be paid but the ITP because it will not be considered as a new property.
How Much is the VAT for a New Build Property?
The VAT rate for a new build property is 10% of the purchase price, except in the case of properties of official protection which will only be taxed 4%. In the case of garage or storage spaces, 4% also applies. And in the case of commercial premises, the VAT rate goes up to 21%.
How is VAT Calculated?
To know the total amount of VAT, you have to do the following:
- What´s first? To know the exact price of the property.
- The second is to know the VAT rate that would be applied to the property.
- And the third is to make this calculation: VAT rate x the property price.
How do you like our advice? If you have any further questions or would like to consult about buying a house, we are at your disposal at CHG! Don’t hesitate and come to visit us.