Since 1st January of this year, the IVA payable upon the purchase of a new property in Spain rose from 4% to 10%. However, there are two ways by which a purchaser can reduce this to between 7% and 8% by either purchasing a property through a Bank, or as a result of the property having been let for a period of at least 2 years.
In the case of a purchase through a bank, most of their stock has been obtained through developers that have defaulted on payments or simply gone into liquidation. Once the property is offered to a potential buyer, the property is now considered second hand by the government and is not liable for VAT, but for ITP (impuesto de transmisiones patrimoniales), upon which 7% or 8% transfer tax is paid, depending on the location of the property in any given autonomous region in Spain.
In the case of a new property, that has been officially rented for at least 2 years since its completion, and which does not have an option to purchase contract in place, it is no longer considered to be a “new” property, and is also exempt from paying VAT upon its purchase, and pays instead the ITP tax above.