VAT Tax Reduction for Property in Spain Extended in 2012

The economic crisis has hit the Spanish property market pretty hard and up until the recession hit it was one of the best emerging real estate investment ventures. Especially popular were the regions of Marbella, Costa del Sol and Mallorca real estate, the largest of the Balearic Islands.

This is why Spanish authorities set up a decree back in 2011 that was going to boost property sales which had been decreasing progressively. They decreed that the VAT tax will be lowered to 4% of the purchase price, a fact that seemed to fight in some places the decrease in property while in some, like Mallorca, it even coincided with a slight increase, especially in terms of beachfront property.

Now, news has emerged that this decree aimed at keeping the VAT property tax at the fixed value of 4% is going to be carried out in 2012. This is a sure sign that authorities wish to prolong their property market saving measures in the coming year. Another side effect of this measure is the boosting of the construction sector.

That means that for a 200.000 EUR home, an investor will get an 8.000 EUR discount, which isn’t exactly pocket money. This measure applies for first home but also second home purchases. People who already more than 2 homes will pay the full VAT tax.

Some towns have “abolished” the property tax altogether, like the the city of Calvia in Mallorca. Their governing party decided to suspend the tax for a period of 4 years, also with the aim of revitalizing the property market, protecting homeowners and attracting potential investors.

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