How
to offset VAT while purchasing and building properties in Spain?
Also known as IVA in Spanish, VAT Tax in Spain accounts
for 21% of the expense. Read on to know more about how to save up on VAT when
you are purchasing or building on urban properties in Spain.
To give you more clarity on the topic,
Adolfo Martos Gross, an expert from GAM Abogados, one of the premier law firms
with bases in Malaga and Marbella, discusses about VAT in depth.
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| VAT in Spain is 21% |
Adolfo says that whenever there is a
transaction involving a Spanish individual or resident, there is VAT levied
irrespective of the buyer. However, if the buyer is a company or a professional
developer registered in Spain, they can offset the VAT amount paid against the
VAT they are supposed to levy on the sale proceeds of the same financial year.
In simple terms, if the VAT amount they
have paid to tax authorities is more than the total VAT they have collected
from sales; they can ask the Spanish Tax Agency or Hacienda to refund the
excess amount they have paid.
However, Hacienda on receiving a tax return
claim will first check for the records of the taxpayer and check to see if it
is an individual or a company. If they are suspicious that the company has no
real business and is just claiming to save amount paid on VAT, they will order
an inspection. Please note that if the chances of ordering an inspection
increases with the amount of refund claimed for, said Adolfo.
As an alternative, the taxpayer can also
retain the excess VAT paid to the tax agency and it can be used as a tax credit
for a period of up to 4 years from that financial year and can be adjusted in
the subsequent years.
For property developers, if the owner of
land is a resident
from Spain or company, the invoices issued for building work undertaken by
construction firms or contractors is also subject to VAT. However, there are
different provisions available.
Usually, the seller in all transactions is
liable to pay VAT to the agency and the buyer is expected to pay the VAT over
the sale price of a product.
If the construction is undertaken by another
company than the owner, the VAT to be charged stands reduced to 10%, instead of
the usual 21%. However, this will make the developer liable for charging and
paying the VAT to the agency.
Usually, when the contractor or
construction firm charges VAT on an invoice, the developer can withhold the VAT
amount and claim it as ‘IVA repercutido’ during the same quarter and the amount
should be affset as ‘IVA soportado’.
This situation is advantageous to all new offplan
developers in the Costa del Sol and has several benefits when cash flow is
considered.
