Do I pay VAT or transfer tax when buying a new build in Spain?
New builds from a developer are subject to 10% IVA (VAT). Resale properties bought from a private owner are subject to 7% ITP (Transfer Tax) in Andalusia. You pay one or the other — never both. The vendor determines which applies.
- 1New build from developer = 10% IVA (VAT)
- 2Resale from private owner = 7% ITP (Transfer Tax) in Andalusia
- 3You pay one or the other — never both
- 4If a developer re-sells a repossessed property, IVA usually still applies
- 5Both taxes are paid at the notary on completion day
- 6ITP rates vary by region — Andalusia is 7%, Madrid is 6%, Valencia is 10%
Key Takeaways
- Always verify the applicable tax with your solicitor before exchanging contracts
- The developer will confirm which tax applies — get this in writing
- On a €500,000 purchase the 3% difference equals €15,000 — material to your budget
When buying a new build directly from a developer in Spain, you pay IVA (Impuesto sobre el Valor Añadido — Spanish VAT) at 10% of the purchase price. When buying a resale property from a private individual, you pay ITP (Impuesto sobre Transmisiones Patrimoniales — Transfer Tax) at 7% in Andalusia. The tax is determined by who is selling — not the age of the property.
IVA (VAT) — Applied to New Builds
IVA at 10% applies when a property is being sold for the first time by a developer or construction company. This covers all new build apartments, villas, and townhouses purchased off-plan or newly completed directly from a developer. The 10% rate has applied since 2012. There is no regional variation — the same rate applies across all of Spain for residential property.
ITP (Transfer Tax) — Applied to Resales
ITP applies to the purchase of a second-hand or resale property from a private individual. In Andalusia (which covers the entire Costa del Sol), ITP is currently 7% of the purchase price. This rate was reduced from 8% in 2021. Unlike IVA, ITP rates do vary by autonomous region — if you are buying outside Andalusia, check the local rate.
Edge Cases and Exceptions
Bank repossessions sold by financial institutions are typically subject to IVA, not ITP. Properties built over 2 years ago but never previously occupied can still be subject to IVA if sold by the developer. Some developers sell resold units (cancelled purchases) that may attract IVA even though the property was nominally completed — your solicitor must confirm.
Why This Matters in Costa del Sol
In the Costa del Sol, the vast majority of off-plan and new build purchases are subject to IVA since buyers purchase directly from development companies. However, if you are weighing a new build versus a resale apartment at similar price points, the 3% tax difference is an important factor in your total cost comparison.
Common Mistakes to Avoid
A buyer purchases a 3-year-old apartment being re-sold by the developer following a cancellation. Even though the property exists and was built 3 years ago, because this is still the developer's first sale of that unit, 10% IVA applies — not 7% ITP. Always check the vendor's status.
Tax regulations change regularly. This answer is for general guidance only. Always consult a qualified Spanish tax advisor for advice specific to your situation.
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