If you are planning to buy a brand-new home in Spain, one of the first questions is whether you pay VAT. The short answer is yes. Unlike resale homes, which pay Transfer Tax (ITP), new-build homes sold by a developer pay VAT (IVA). New builds are not VAT-exempt, and assuming they are is one of the most common budgeting mistakes I see with international buyers.
How much VAT do you pay on a new build?
The standard VAT rate on a new residential property is 10%, when the home is sold for the first time by the developer. On a €300,000 apartment in Marbella, that is €30,000 of VAT on top of the price. Always check whether the price you are quoted includes or excludes VAT, because brochures are not consistent. Ask for it in writing.
On an off-plan purchase, VAT is normally charged on each instalment you pay during construction, not only at completion. The developer should issue an invoice for every payment, and the amounts should be reflected in the contract. I explain how those payments are protected in how your deposit is protected when you buy off-plan.
VAT is not the only tax: AJD
On top of VAT, a new-build buyer pays stamp duty (AJD, Actos Jurídicos Documentados) when the deed is signed. The rate is set by each region. In Andalusia the standard rate is currently 1.2%, so VAT and AJD together come to around 11.2%. I go through the calculation in AJD in Andalusia.
Notary, Land Registry and legal fees are separate from taxes and need to be added to the budget. The full picture, for new build and resale, is in the taxes that apply when buying property in Spain.
VAT versus Transfer Tax
The rule is simple. New homes bought from the developer pay VAT. Resale homes bought from a private owner pay ITP. In Andalusia, ITP is currently 7%. So the tax bill is higher in percentage terms on a new build, but the price, condition, warranties and running costs differ, so compare the all-in cost. My comparison is in new build versus resale in Spain.
Cases where the rate is different
- Protected housing: certain subsidised homes can have a reduced rate of 4%. This is rare on the Costa del Sol market and depends on specific legal qualifications.
- Garages and storage rooms: parking spaces and storage rooms sold with the home are normally treated like the home. Those sold separately can be taxed at 21%. Ask how the tax is applied in your contract.
- Commercial property: offices, shops and other non-residential property pay 21% VAT.
- Land: a plot of land can have a different treatment depending on whether it is buildable and who sells it.
Can I reclaim the VAT?
Do not assume you can. Reclaiming VAT depends on the buyer being a business that uses the property for an activity that allows it, and the rules are strict. Renting a home for residential use generally does not allow it. If you are thinking about buying through a company, take advice from a Spanish tax adviser before signing, not after.
What I tell buyers
I once met a British buyer who thought buying off-plan meant avoiding taxes altogether. We caught it in the first conversation, and I gave them a full breakdown of VAT, AJD and legal costs so they could set the right budget. The principle is the one I follow with every client: put every tax in writing before a deposit is paid.
Want the full cost of a new development before you reserve?
I work with new-build and off-plan homes on the Costa del Sol, so I can give you the tax and cost breakdown for a specific development before you reserve. For the tax advice itself, I will put you in touch with an independent adviser. Get in touch and tell me which development you are looking at.
