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PROPERTY

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

Spain considers banning tourist lets in residential buildings

The Spanish government has announced it's studying the possibility of prohibiting tourist apartments in residential buildings where property owners live.

Spain considers banning tourist lets in residential buildings

The Minister of Housing and Urban Agenda, Isabel Rodríguez, announced this Tuesday that the Government is studying a reform of the Horizontal Property Law in order to allow property owners to prohibit tourist apartments in their residential buildings.

In Spain, each building has what’s known as a community of neighbours, referred to La Comunidad or Comunidad de Vecinos in Spanish, and essentially the Spanish government is considering giving them veto power over tourist apartments in their buildings.

READ ALSO: ‘La comunidad’: What property owners in Spain need to know about homeowners’ associations

The announcement was stated in an interview on Telecinco, in which Rodríguez stated that this move comes as a consequence of recent supreme court rulings on tourist apartments in Oviedo in Asturias and San Sebastián in the Basque Country.

In the rulings, the magistrates concluded that the rental of housing for tourist use is an economic activity, and agreed that communities of owners in two separate buildings could ban tourist rentals in several apartments.  

“It will be the neighbourhood communities that will also be able to participate in these types of decisions, because this phenomenon, which is not exclusive to our country, affects the entire world and the main capitals in Europe,” explained the minister.

READ ALSO – UPDATE: Which cities in Spain have new restrictions on tourist rentals?

Recently, Rodríguez has criticised that the proliferation of tourist apartments causes problems for locals, that it stops them from being able to access decent housing and raises the price of rentals.

She praised the regions which have taken steps to try and put a stop to this and gave the recent example of Barcelona City Council, which announced last Friday that it would eliminate all tourist apartments by the end of 2028.

She believes this move in Barcelona “will benefit citizens who want to live in their city, who do not want it to be a theme park and who prioritise the right to access housing over economic interests”.

Spain’s Horizontal Property Law , which was modified once in 2019, already states that it “requires a favourable vote of three-fifths of the total number of owners who, in turn, represent three-fifths of the participation quotas”. This means that already owners have a big say in whether tourist licences can be granted to apartments in their buildings.

However, the particular wording of the law has been the subject of much legal controversy and judicial interpretation. The reason is because the wording of the law only mentions the possibility for communities to “limit or condition” tourist use, but they do not have the power to “prohibit” since the law does not expressly say so.

Several regions have their own rulings through regional courts, but this new announcement aims to make it universal across the board in Spain and ensure that there’s no room for misinterpretation.

Rodríguez is set to meet this afternoon with the governing board of the Spanish Federation of Municipalities and Provinces (FEMP) and the Housing and Tourism Commissions to address this matter and come to a decision. 

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