The taxes on a new build
| Tax | Rate | Paid to |
|---|---|---|
| VAT on a home | 10% | Developer, with each payment |
| VAT on plots, premises, offices | 21% | Developer |
| Stamp duty (AJD) | Balearic rate on the deed value | Balearic tax agency, by the buyer |
When is it a new build?
A property is a first delivery if it is sold by the developer after construction or major renovation and has not been used for more than two years by others. A second sale is a resale and pays transfer tax instead. See transfer tax.
Off-plan purchases
Each stage payment carries 10% VAT and must be guaranteed by a bank guarantee or insurance. Keep every invoice: they form your acquisition cost for a future sale. See capital gains tax.
Waiving the VAT exemption
When a company buys a second-hand property for its business, the seller and buyer can sometimes opt for VAT instead of transfer tax, which the company can then deduct. Stamp duty is then charged at a higher rate. This is a specialist operation. See corporate tax.
Check before signing
Make sure the price states whether VAT is included, that the developer issues proper invoices and that the bank guarantees cover each payment. See our property tax service.
An illustrative example
Based on situations we commonly see; not a specific client. A couple from Norway bought an off-plan apartment in Santa Ponsa with four stage payments. We checked that each invoice included 10% VAT and a bank guarantee, and calculated the stamp duty at completion, so the final budget matched what they had planned.
How Castell.tax can help
We handle the taxes of buying, owning, renting and selling property in Mallorca, Ibiza, Menorca and Formentera: purchase taxes, IBI and the cadastre, rental returns, plusvalía and capital gains. We coordinate with your lawyer and notary so the figures are right before you sign. See our property tax service or contact us in English or German.
This page is published by Castell.tax, the tax practice of Castell.law in Palma de Mallorca. It is general information; tax rules and rates change, so check your case with us before filing.
Not sure what you owe? Ask before the deadline
Send us your situation or the letter you received. A tax adviser will tell you what applies, what it could cost and what to file.
Frequently asked questions
What VAT applies to new homes in Spain?
10% on homes, with up to two parking spaces and a storage room in the same building.
Do I also pay transfer tax?
No, a new build pays VAT and stamp duty instead.
Is VAT refundable for private buyers?
No, private buyers cannot deduct it.
What VAT applies to a building plot?
21%.