When it comes to buying property, tax rates play an important role in the final return calculation. However, in some cases, real estate professionals can enjoy a reduced rate in Andalusia that can significantly ease their financial burden.
The reduced rate of 2%
For natural persons operating in Spain or (Spanish) legal entities carrying on a business activity to which the accounting rules of the 'Plan General de Contabilidad del Sector Inmobiliario' apply, a special tax rate of only 2% applies when buying a property. Specifically, you can benefit from the reduced rate if you are a property professional operating in Spain, either if autonomo (sole proprietorship) or through a Spanish company. Consider, for example, a professional flipper of properties (buying, renovating, selling).
Find more information on setting up a Spanish SL here.
The requirements
However, to benefit from this reduced rate, there are some requirements that must be met:
(a) Inclusion in current assets: The buyer, whether an individual or a company, must include the purchased property in their balance sheet as current assets. This means the property must be an active part of their business operations.
(b) Timely sales: The purchased property must be transferred within five years of purchase, with actual transfer of title. Moreover, this transfer must be subject to transfer tax. The intention to sell within five years must be included in the notarial deed of sale.
It is essential to stress that compliance with these conditions is crucial to benefit from the reduced rate.
How to demonstrate
To prove your eligibility for the reduced rate, you must meet certain documentation requirements. This includes a certificate confirming that you fall into a situation of enrolment in the appropriate business activities.
- For those in property development (Group 833, subgroup 833.2)
- For those who rent dwellings (Group 861, subgroup 861.1).
In addition, you should clearly state your intention to include the property in your business assets in the public document formalising the transfer. Keep in mind that there may also be administrative checks to ensure compliance.
Decision: reduced rate for real estate professionals in Andalusia
In short, if you are a real estate professional and planning to purchase a property, it is important to be aware of the possibility of a reduced tax rate of 2%. Make sure you meet all the requirements and have the right documentation on hand to enjoy these financial benefits. It can significantly help you reduce the cost of your property transaction.
Learn more about the property buying process in Andalusia here.
