What does first delivery of homes mean? What is the difference between first and second delivery when buying a house in Spain? Let’s analyse the concept of first delivery of homes (new homes).
When buying a house in Spain (our department can help you with all the paperwork), we must differentiate between buying a new house and a second-hand house. This is because, depending on this classification, we will have a different taxation path and tax payments. Specifically, first-time home purchases, i.e. new homes, are subject to Value Added Tax (VAT). On the other hand, when we buy second-hand homes, i.e. second or subsequent home purchases, they are subject to Property Transfer Tax (ITP).
So, what do we mean by (first delivery) of a property? These are properties that we purchase from the developer when the construction or renovation is completely finished. There is one exception, which states that this will be the case except for properties that have been used continuously for a period of 2 years or more, provided that these tenants are different people from the buyers.
So when the property developer completes the construction work and the properties are rented out, after two years these properties are put up for sale, we have two options: when these properties are purchased by the tenants themselves, we are dealing with a “first delivery”. Otherwise, if these properties are purchased by people other than the tenants, we will be dealing with a “second delivery”.
When are housing constructions considered to be completed?
The dwelling is considered completed when the architect and quantity surveyor who have supervised the construction issue the completion certificate.
What does the tax agency literally say about this?
Law 37/1992, of 28 December, on Value Added Tax, does not expressly define what is meant by property for the purposes of VAT. Traditionally, the Directorate-General for Taxation defines housing as ‘a building or part thereof intended for the habitation or dwelling of a natural person or family, constituting their home or the centre of their domestic life’.
The term ‘first delivery’ of dwellings refers to those acquired from the developer when construction or renovation is complete, unless the dwellings have been used continuously for a period of two years or more by persons other than the purchasers.
In other words, if the developer, once the works have been completed, rents out the dwellings and puts them up for sale after two years, if the dwellings are purchased by the tenants themselves, this constitutes a ‘first transfer’, but not if the dwellings are purchased by different persons.
The construction of a dwelling shall be deemed to be completed when a certificate of completion is issued by the architect and quantity surveyor who supervised the work.
Tax applicable to the sale of homes and lease-to-own agreements
-
The sale of new homes by developers (first-time home sales) is subject to Value Added Tax (VAT).
-
The sale of second-hand homes by businesses (second and subsequent deliveries of homes) is subject to Property Transfer Tax (ITP).
-
The sale of homes by private individuals is subject to Property Transfer Tax (ITP).
The purchase of a new home means that the buyer is obliged to pay Value Added Tax, which is calculated by multiplying the price of the home by the tax rate in force at the time of purchase. Payment is made to the seller, who in turn pays the tax to the tax authorities.
The tax rates established for the sale of homes, including up to two garages per home and annexes located in the building that are transferred together, are currently:
-
10% in general,
-
4% in the case of special regime or publicly promoted social housing.
The purchase of a second-hand home means that the buyer must pay the Transfer Tax, which they must pay to the regional tax office corresponding to the location of the property.
In lease agreements with an option to purchase new homes, including up to two parking spaces per home and annexes located in the building that are leased together, before exercising the option, the lease (provision of services) will be subject to VAT, applying tax rates of 10% and 4% in the case of special regime or publicly promoted social housing.
For more information on buying property or assistance with the paperwork, please do not hesitate to request our services for sales in Spain, whether you are a resident of our country or a foreigner. We also advise you to read our guide to buying property in Spain, where we analyse everything in detail, including taxes, expenses, advice and information you should know when buying a house in Spain.
If you have any questions, please do not hesitate to contact us, and don’t forget to visit our property search engine where you can find some very attractive properties.
