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Recovering VAT (IVA) on a flat bought in Spain is possible in theory, but only in certain situations. It applies mainly to new-build properties bought from a developer that serve an investment purpose and generate income, for example from rental or resale, or are acquired for business purposes. The process is complex and requires complete documentation and a good knowledge of the regulations.
What VAT do you pay when buying property in Spain?
VAT, known in Spanish as IVA, is a tax charged on a variety of goods and services, including the sale of property. The rates are:
- 10% – usually on new-build properties,
- 21% – on land.
When you buy a new flat directly from a developer, VAT is often added automatically to the final purchase price.
When can you recover VAT on a flat you have bought?
A VAT refund is of particular interest to people who are not residents of Spain and plan to let the property or sell it on. A VAT deduction is possible where:
- the property serves an investment purpose and generates income,
- the purchase is made for business purposes – in which case a VAT refund may be easier to obtain.
In such cases, a VAT deduction can lead to considerable financial savings.
What documents are needed for a VAT refund?
The basis of a refund application is detailed invoices, which are proof that VAT was paid when the property was acquired. Successfully recovering VAT requires collecting and properly archiving all the documentation relating to the purchase.
Can you recover the tax when buying on the resale market?
No. When you buy a resale property, that is, one previously occupied, VAT is not charged. Instead, transfer tax (ITP) applies, and it is not refundable. Investors buying on the resale market must therefore take different tax considerations into account than when buying from a developer.
What is the procedure for recovering VAT?
The process can be time-consuming and requires care. The key steps are:
- Analysing how the acquired property will be used.
- Collecting and archiving the documentation, including invoices confirming payment of VAT.
- Submitting the application to the relevant tax authorities.
- Waiting for a decision – in most cases the authority has a set period in which to consider the application and issue a decision on the VAT refund.
Given the detailed nature of the regulations, it is advisable to consult a tax adviser. An expert will help explain the more complicated aspects of the rules and procedures, avoid mistakes and make use of the available opportunities to improve tax efficiency.
Frequently asked questions
How much is VAT on a new flat in Spain?
The VAT (IVA) rate on new properties is usually 10%, and on land 21%. When buying from a developer, VAT is often added to the final price.
Who can apply for a VAT refund on a flat in Spain?
VAT deduction is possible when the property serves an investment purpose and generates income, for example from rental or resale. It is easier to recover VAT on a purchase made for business purposes.
Can you recover ITP when buying a resale flat?
No. When you buy on the resale market VAT is not charged, and the transfer tax (ITP) applied instead is not refundable.
What documents are needed to recover VAT?
Detailed invoices confirming payment of VAT on the acquisition of the property are essential. All the documentation must be collected and properly archived.
Is it worth using a tax adviser for a VAT refund?
Yes. Given the complexity of the rules and procedures, it is advisable to consult a tax adviser. They will help you avoid mistakes and make use of the available tax opportunities.
Aria Spain sells new-build properties from developers on the Costa Blanca, Costa Cálida and Costa del Sol with no commission for the buyer (0%) and helps with the whole process: from the NIE number and bank account to the visit to the notary and rental management. Book a free consultation to discuss your purchase.
