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Ten acronyms you need to know to buy a property in Spain

Nevermind being fluent in Spanish, knowing what all the acronyms used when buying or selling a property in Spain is equally as important if you want to make sure you know what you’re going to pay in tax, interest and more. 

spanish acronyms property
Do you know what the difference between TIN and TAE are when browsing through mortgage options n Spain. Photo: Wes Hicks/Unsplash

IVA (Impuesto sobre el Valor Añadido)

This is how Value Added Tax – VAT – is shortened in Spain. VAT on the purchase of a new build is currently 10 percent across Spain’s regions, with one exception.

The Canary Islands have their own VAT system called IGIC (Impuesto General Indirecto Canario), which is lower than for the rest of Spain and currently is 6.5 percent on the value of the property.

ITP (Impuesto sobre Transmisiones Patrimoniales)

ITP is the acronym used to describe the tax that applies to the transfer of ownership of a second-hand property in Spain. It varies across Spain’s regions, ranging from 4 percent to 10 percent currently.

AJD (Actos Jurídicos Documentados)

Often referred to as IAJD (the I stands for impuesto – tax), this tax usually goes hand in hand with ITP, and corresponds to all the administrative and notarial processes that come with getting a mortgage in Spain. 

The cost varies between autonomous communities but is usually 0.5 to 2 percent of the total mortgage payment, with some regions offering price reductions.

Who pays the IAJD, you may wonder? Well, this tax applied was debated in Spain’s Supreme Court in 2018, with judges ruling that for mortgages signed after November 10th 2018 onwards, it’s the banks that should foot the bill. 

READ ALSO: The real cost of buying a house in Spain as a foreigner

IRPF (Impuesto sobre la renta de las personas físicas)

IRPF is how people in Spain refer to personal income tax, and those who sell their Spanish property and make a profit will also have to pay this capital gains tax and declare it in their annual income tax declaration, referred to as la declaración de la renta

In 2020 this capital gains tax stood at 19 percent for a profit of up to €6,000, 21 percent for a profit of €6,000 to €50,000, and 23 percent for more than €50,000, with a few exceptions.  

IRNR (Impuesto sobre la Renta de no Residentes)

This acronym refers to non-residents income tax, which foreigners who do not officially live in Spain (spend fewer than 183 days per year in Spain) but own property in the country need to pay if they make a profit from it by renting it out. 

For EU/EEA residents the taxation on earnings is set at 19 percent whereas for non-EU/EEA it’s 24 percent.

VPO (Vivienda de Protección Oficial)

This acronym refers to official public housing in Spain, properties that are sold at a lower market price for low-income people and families. 

That means that if you see a property advertised as VPO, you won’t necessarily be able to make an offer for it unless you meet certain criteria.

Again, the conditions to be able to apply vary between regions in Spain but it usually entails not owning another property and not being able to sell the social housing unit for the first ten years of ownership, among other requirements.  

READ ALSO:

TIN (Tipo de Interés Nominal)

If you’re going to apply for a mortgage in Spain, you’ll definitely come across this acronym. 

TIN refers to the Nominal Interest Rate, a fixed percentage that is agreed upon as payment for borrowing money from the bank. In other words, the interest on your loan.

TAE (Tasa Anual Equivalente)

TAE is the equivalent of the annual percentage rate (APR) term used in English. 

It’s a more accurate and clear way of knowing how much a person will pay in interest for their mortgage, as it includes all other expenses and commissions added, whilst the TIN doesn’t. 

Therefore, the TAE is the best way to know whether a bank is offering you good mortgage conditions or not and to compare offers.

The percentage difference between the APR and the TIN is usually greater in personal loans than in mortgage loans. Currently, it is possible to find Spanish banks that offer fixed annual TAE interest rates below 2 percent, and financial entities are open to negotiating a rate below that figure as well. 

IBI (Impuesto sobre Bienes Inmuebles)

IBI is a tax on property goods, and it also goes by the name SUMA.

It’s a local tax that has to be paid once a year by all property owners in Spain, and it serves as a benchmark to calculate all other Spanish property-related taxes.

As the IBI amount is decided by the town hall in which your property is located, there can be big differences between municipalities.

For example, in Málaga province, there’s currently a difference of roughly €400 between what homeowners in the municipalities of Torremolinos, Cártama and Rincón have to cough up on average in IBI tax and what those who are based in Málaga city have to pay (based on a property worth €76,000).

Before buying a property, make sure to check the IBI in the municipality in order to avoid any nasty surprises. 

READ ALSO – How to make money from your Spanish property during low season

IIVTNU (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana) 

This long-winded acronym is usually referred to as plusvalía in Spain, a municipal tax charged by town halls on property sales, based on the increase in value of the land on which the property lies from when it was sold.

In late October 2021, Spain’s Constitutional Court ruled that the country’s plusvalía property tax is unconstitutional, meaning it’s theoretically no longer applicable.

It has been reported, however, that Spanish tax authority Hacienda are thinking up new ways to recoup some of the increases in land value, as town halls across Spain worry about how much the constitutional ruling will affect their public coffers.

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PROPERTY

How to contest the cadastral value of your Spanish property

The cadastral value and cadastral reference of a property in Spain affect various factors including how much yearly property tax and inheritance tax you'll pay. Here's how to change the valuation Spanish authorities give your home.

How to contest the cadastral value of your Spanish property

When it comes to taxes, everyone wants to know if there are ways to pay less. While it’s not always possible, there are certain factors that affect particularly taxes associated with your Spanish property – namely the cadastral value and the cadastral reference. But, can they be changed or rectified?

What is the cadastral value?

The cadastral value is applied to all properties in Spain. It’s the value applied to your property by the Ministry of Finance or Hacienda and serves as a tax base to determine how much IBI tax or Impuesto sobre Bienes Inmuebles you pay for example. This is a yearly tax for all those who own property in Spain.

READ ALSO: What is Spain’s IBI tax and how do I pay it?

The value will depend on the size of your property, the condition it’s in, the year it was built and the cost of construction, among other factors.

It differs from the cadastral reference, which is an estimate of the market value of a property and is used as a reference for the real estate market. It is also used as a tax base for inheritance and property transfer tax.  

How is it determined?

At the beginning of each year, the cadastral value of homes is reviewed, and as a result, it can increase or decrease. This is why your IBI bill can increase or decrease too. As a general rule, the cadastral value is usually much lower than the market price, but this is not always the case.

How do I find out the cadastral value? 

To know the cadastral value of a property, you must first know the cadastral reference. Then you can find the value in the corresponding public records online. You can find this reference on your IBI bills, as well as on your property deeds.

Once you have this you can go to the electronic headquarters of the Cadastre, and click on ‘reference value’. There you will find all the information about the cadastral reference and the corresponding cadastral value.

Even if you’re not the owner of a property, but want to find out the cadastral value of a property you’re considering buying, you can find it out here.

Can I change the cadastral value of my home?

Yes, it is in fact possible to change the value. If you believe that the cadastral value of your property is too high with respect to the market price of your home, you can request that it be reduced.

You may want to do this in order to lower your IBI bill or if you want to sell your property at a lower price than the market value.

How do I lower the value?

If you believe that you have a case for changing it, you can make a claim to the General Directorate of Cadastre, overseen by the Ministry of Finance. There are two different claims you can make:

  • The procedure for correcting discrepancies
  • The procedure for rectification of material and arithmetic errors.

Procedure for correcting discrepancies

This option is typically used when there is a large difference between the market price and the cadastral value of a property, as well as when there are errors or false data about the characteristics of your home.

To do this, you must go to the Cadastre office in your municipality or apply online at the Cadastre Electronic Headquarters.

Procedure for rectification of material and arithmetic errors

The second option is used when there are errors or incorrect urban planning information, which affects your home. Again you can do this in person or online. In this case, it will have a retroactive effect. If you have paid too much IBI in the past, then it should be returned to you if the application goes in your favour.

Can I change the cadastral reference of my home?

If the reference value of your home is higher than the market value, then you may be wondering if you can change the reference in order to lower your tax base.

Unfortunately, you cannot request changing this in the same way as you can with the cadastral value. But, the good news is that there is a way to challenge it indirectly.

To do this you will need to request an appraisal from a company approved by the Bank of Spain. If the result of this turns out to be lower than the reference, you can try to rectify your self-assessment tax return, providing the appraisal as evidence that you should be on a lower tax base. As mentioned above, this will only affect certain taxes like inheritance or property transfer. 

In order to approve this, the tax office will need a report from the General Directorate of the Cadastre who may be able to rectify the reference and provide a report to settle the matter.

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