What is the ITP tax?
ITP stands for Impuesto sobre Transmisiones Patrimoniales in spanish, it is, the Transfer Tax. This, is a tax levied on the purchase and sale and transfer of real estate, as well as on certain real right of enjoyment transactions, such as mortgages. It also applies to the acquisition of shares or holdings in companies, in certain cases.
Its purpose is to raise funds for the development of public policies and the financing of public services in the Valencian Community. It is a tax that contributes to the welfare of society and the economic development of the region.
When does ITP apply?
As mentioned above, ITP applies to the transfer of real estate, such as land, buildings, business premises and dwellings, among others. It also applies to the transfer of rights of enjoyment, such as mortgages, usufruct or use and occupancy.
Who has to pay the ITP?
ITP is payable by the purchaser of the property, i.e. the buyer. (although in some cases the seller may pay part or all of the tax). It is important to bear in mind that the ITP is a tax that is applied on the transfer value of the property, so it is necessary to determine the real value of the property in order to pay the corresponding tax.
It is important to bear in mind that the ITP is a tax that must be paid at the moment of the transfer of the property or of the real rights of enjoyment. If the corresponding tax is not paid within the established deadline, penalties and fines may be imposed. It is therefore important to be aware of your tax obligations and to comply with them in a timely and correct manner.
ITP tax rate in the Valencian Community
General tax rate of 10 %
The Transfer Tax (ITP) in the Valencian Community is one of the highest in Spain. The ITP tax rate varies depending on the transferable property and the type of transaction. In the case of the Valencian Community, the general tax rate for the sale and purchase of properties is 10 %.
Special tax rate of 11%
As of January 1, 2023, a special tax rate of 11% is established for acquisitions or the creation of real property rights (excluding security rights) whose value exceeds one million euros. For the application of this tax, purchases linked to the same registered property that are made from the same seller within a period of three years, counted from the date of each transaction, are considered as a single transaction for the purpose of calculating the tax.
Reduced tax rate of 8%
- Young people under 35 years of age, if it is the purchase of their first main residence and they do not exceed the income threshold for the previous period stipulated. In 2022, this threshold is €25,000 in individual taxation, or €40,000 in joint taxation.
- VPO - Vivienda de Protección Oficial (Social Housing) that will be the purchaser's first main residence.
Reduced tax rate of 4 %
There is a reduced tax rate of 4% for the following cases:
- Women victims of gender violence. The income limits are €30,000 for individual taxation or €47,000 for joint taxation.
- If it is a transfer of a VPO (Social Housing) in a special regime situation.
- If the home is the habitual residence of a large family and single parent in the general category. The income limits are €30,000 in individual taxation or €47,000 in joint taxation.
- If the home is the habitual residence of a large family and single parent of special category. The income limits are €35,000 in individual taxation or €58,000 in joint taxation.
- People who have a physical or sensory disability of 65 % or more.
- Persons with a mental disability of 33 % or more, only for the part of the property purchased by the purchaser.
- Real estate located in an area declared as an advanced industrial area, when a 50% rebate of the ICIO (tax on constructions, installations and works) has been previously approved by the town council. In addition, the following circumstances must be met:
- The property is to be the tax domicile or place of business of the purchaser's company and the public document formalising the acquisition expressly states that the property is to be used for the purchaser's business activity.
- That the purchaser maintains the exercise of the business activity and its tax domicile in the Autonomous Community where the property is located for at least 3 years, unless the purchaser dies within this period.
- During this 3-year period, the purchaser must not carry out any acts of deposition or corporate operations that may result in reducing the value of the acquisition, transferring the real estate, or transferring the real estate from the business activity or using it for purposes other than as the tax domicile or place of business.
- That, during this 3-year period, the net amount of the business activity does not exceed 10 million euros, in accordance with the terms of the LIS (Corporate Income Tax Act).
- From January 1, 2023, transfers of real estate intended to be the headquarters or workplace of companies or professional businesses with tax and social domicile in municipalities at risk of depopulation will be subject to certain conditions, provided that such companies or professional businesses meet the following requirements:
- Establish and maintain the social and tax domicile in one of the municipalities at risk of depopulation during the three years following the purchase.
- Carry out an economic activity within the three years following the acquisition, excluding the administration of movable or immovable property as the main activity.
- Hire and maintain at least one full-time employee registered in the general regime of Social Security during the three years following the acquisition.
Although these are the most general cases to obtain the reduced tax rate of 4% in the ITP in the Valencian Community, they are not the only ones and there are also some other exceptional cases, of which you can obtain more information through the website of the Generalitat Valenciana or in person at the competent public body of your locality.