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Spanish Taxation

Article supplied by Welex Lawyers & Accountants

Did you buy a property in Spain that is under construction, and are you willing to sell your purchase option to a third party? Are you willing to purchase an already existing option to purchase a property that is under construction in Spain? This issue we set out a full explanation of the tax liabilities that you should be taking into account at the time of the assignment of a private purchase contract for properties under construction in Spain.

First, a quick brushstroke of the taxation that derives from the assignment to a third party by the purchaser of the rights they have of a private purchase of contract of dwelling, normally under construction, taking place with the developer, subrogating the third party in that Spanish contract. Initially it is necessary to confirm with the developer, and that it is stated in the contract, that, in effect, the private purchase contract has been signed between the purchaser and the developer and that it states the option of transfer.

Suppose the following example:

An “X” purchaser has signed a Private Purchase Contract in Andalucía for a property that is currently under construction with a “Y” developer. Once finished, the final price of the Spanish house is 300,000 Euros (IVA/VAT included). The delivery date of the finished future home is estimated in the contract to be about 20 months from the signing of the contract. “X” has made a payment on the account of 40,000 Euros, including for the corresponding IVA/VAT. With the written authorisation of the developer, the purchase agreement allows the transfer of the rights subscribed by “X” to a third party. Ten months after the signing of the private contract of sale, “X” receives an offer from a third party “Z” for the assignment of the rights of the purchase contract, subrogating “Z” in the position of “X”. Both parties — “X” and “Z” — agree on a price for this assignment: 50,000 Euros, which means that “Z” must pay “X” the amount of 40,000 Euros, which is the amount paid on account under the Private Purchase Contract, and an additional amount of 50,000 Euros, would be the price agreed for the transfer.

According to the different binding resolutions of the Spanish Directorate- General of Taxes, this legal assumption of transfer to third parties of the rights of a private contract for the sale of a property in Spain would be an assumption of a transfer of rights, not of property, and would be subject to the Spanish Transfer Tax in the form of onerous patrimonial transfers. According to the law that regulates this tax, in this case, the taxpayer would be “in the transmissions of goods and rights of all kinds, who acquires…” (Article 8.a RDleg 1/1993, which approves the Property Transfer and Legal Document Tax). Therefore, it would not be the transfer of property but the rights held by the transferor against the vendor entity, which comes as the result of the conclusion of the private contract of the property.

According to article 17.1 of the law regulating the tax, “In the event of real estate under construction, the tax base will be constituted by the real value of the property at the time of transfer of the credit or right, without it
being less than the amount of the consideration paid for the assignment.” The applicable tax rate will correspond to the property that is transferred, in this case the type corresponding to the transfer of real estate. In Andalucía, the tax rate would be eight per cent in its first tranche (article 11.1.a).

In our example, there are several values that can generate doubts when determining the tax base.

– On the one hand, we have the price paid on account for “X” at the signing of the private contract: 40,000 Euros.

– On the other hand, we find the value that the parties have agreed upon for the assignment: 50,000 Euros.

– Finally, there is the real value that the property would have at present, that is, 10 months after the granting of the Private Purchase Contract. This value can be difficult to quantify by the parties “X” and “Z”, so we could go to the developer who, through his architect, certifies the value of the property based on the volume of the construction executed. The architect certifies this value in the amount of 150,000 Euros.

Therefore, the taxable base would be formed by the real value that the asset has at the time of the assignment per the amount of construction completed (150,000 Euros), unless the amount of consideration paid for the assignment is greater (50,000 Euros), in which case this would be the tax base. That is, the tax base is placed on the higher of the following variables: the value of the construction at the time of the assignment or the price paid for it. Consequently, the degree of development of the building under construction constitutes an essential element to be taken into account when determining the tax base of the operation.

In our example, “Z” is subject to the tax on property transfers on the real value of the construction at the time of the assignment; this is 150,000 Euros and is calculated at a tax rate of eight per cent. This practical case does not imply any legal case or tax advice. Any similar situation must be analysed carefully and should always be carried out by consulting with the corresponding tax offices.


Welex Lawyers & Accountants

C/ Ramón Gómez de la Serna 23, Local 7, Marbella Tel. (+34) 952 775 521


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