Spanish Property VAT (IVA) reduced from 8% to 4%

In an attempt to jump start the Spanish property market, the ministry for housing has halved the tax on new homes from 8% to 4%.

The reduction in IVA only applies to new properties. The transfer tax for second hand properties remains at 7%.

This is a clear policy U-turn from the government, last year an ill-judged and vain attempt to increase the tax take from property transactions the government raised IVA from 7% to 8%.

The reduction is a temporary measure and will last until December 2011.


Whilst this will have some effect on shifting the  it may have the unintended consequence of driving down prices in the second hand market.