Crunching the numbers: What is the VAT payable when buying a new house?

Before deciding whether or not to buy a property, it is essential to get some perspective and, as the saying goes, to ‘sit down and crunch the numbers’. As well as possible expenses such as mortgages, loans, or sales commissions, to name just a few, you also need to consider what taxes are going to be payable. Do you plan to invest in a house? What is the VAT payable when buying a new house? Read on!

What exactly is a ‘new house’?

Although this might seem obvious, for tax purposes a house is deemed to be ‘new’ when there is a first ‘conveyance’, i.e. when it is conveyed from the developer to the purchaser, and the building works must have been fully completed.

Therefore, for the Tax Authorities, it makes no difference if the person living in the house is ‘first’ or not. For example, if you buy a house that belongs to a bank, then you will be exempt from paying the tax in question.

The only exception that may arise is where the property has not been completed by the developer, which it needs to pay off its debt to the lender. This gives rise to a ‘legal assignment’ of the ownership rights, but not to a conveyance of the property, and furthermore there is no final certificate of the completion of the building works. As such, the bank would be the owner and would be responsible for finishing the construction process.

What about pre-owned houses?

You will have to pay Capital Transfer Tax (ITP), which depends heavily on the Autonomous Region in which the house is located, but you can estimate that it will be around 6% which is the rate specified by law.

VAT rates for the purchase of a new house

Bearing in mind what has been stated above, there are 2 different tax rates depending on the ‘nature’ of the house, and always on the basis of the value recorded in the deed:

• Publicly-built subsidised housing (VPP) and all non-subsidised housing: 10%
• Privately-built subsidised housing (VPO) and publicly-built VPO housing: 4%

Were you aware of these rules governing the payment of VAT on the purchase of a new house?