The VAT applied on any purchase of new residences in Spain has increased from 4% to 10% since the beginning of 2013 and also the Tax on Proprietary Transmission (TPT) in the Valencian Community, which is applied on purchases of second hand homes, which has increased from 7% to 8%.
This measure was announced months ago by the regional government and is in full force since the 1st January 2013. The increase in one percentage point will raise the cost of acquiring a property of 100000 Euros in around 1000 Euros.
In a scenario where the regional governments are trying to find ways to reduce their deficit, the increase of this tax is an easy way now that the VAT has reached 10%. The TPT is a tax regulated by the regional communities and differs from one community to another.
Therefore, as the VAT for new homes is more or less the same for all communities, the will to put the TPT on the same level can be the best excuse to increase it, as most of these regional governments are risking the suffocation of their public accounts, and some of them have been obliged to ask the central government for financial aid.
The recent ups and downs of all taxes affecting properties since the government of Zapatero have helped some communities like Andalusia to raise the TPT. It was nearly a political fight, as most of the regions with governments of the Popular Party did not agree with this raise, as they were at that time declaring that raising taxes was not the way to reduce the deficit or to leave the crisis behind.
Nevertheless, now the Popular Party has increased the VAT for properties to 10% and it is probable that many regions will take advantage of this to raise the TPT around that level. Those communities which have asked for financial aid are the ones with more possibilities to do so, like Catalonia or Murcia. Murcia has a TPT between 2% and 7%, depending on the social situation of the acquirer and Catalonia has 5%, 7% and 8%.
Castilla Leon and Castilla La Mancha are also thinking of increasing it, as well as Andalusia and Balearic Islands. These last two regions cannot increase it that much as they already carried out some raises recently. All of them except Madrid and Aragon are planning to increase it, according to a recent article in Expansion.
In 2011, all communities collected 4000 million Euros through the TPT, 20% less than in 2010. The collection in 2012 also seems to follow this path, with a drop of around 20%.