All the fiscal keys of the real estate market

The real estate market is beginning to move and this is demonstrated by the latest provisional data from the Ministry of Transport, Mobility and Urban Agenda. The sale of homes registered 197,762 transactions between April and June 2022, the highest data for a second quarter since 2007, when 227,562 operations were reached. Real estate transactions accompanied the positive trend throughout the country, except in the Community of Madrid, the Basque Country and the autonomous city of Ceuta.

In Ceuta it contracted 4.2% during the second half of the year, compared to the same period in 2021. In the Basque Country, the fall in transactions between April and June was 3.8%, to 6,231 transactions and In the Community of Madrid there were 24,181 home sales between April and May, 3.22% less than in the same months of 2021. The autonomous community that led real estate transactions was Canarias.

Although it is more than evident that the real estate market continues to break records, the forecasts are not so good for the coming months. The sharp rise in interest rates carried out by the European Central Bank has caused a considerable increase in the Euribor, this implies an immediate consequence in the increase in the cost of mortgages and, therefore, a certain global disinterest in the purchase of real estate.

Transmission of a home

The transfer of a home is a voluntary legal transaction between two parties where the selling party agrees to deliver the property in exchange for a certain price that the buyer will assume. This operation implies certain tax obligations for both the seller and the buyer, as detailed by the ARAG firm.

Tax obligations of the selling party

When selling a home, there are mainly two tax obligations for the seller: assume the capital gain derived from the sale of the property in the Personal Income Tax (IRPF) in the year after the date of sale and, the other is to accept the Tax on the increase in the value of urban land (IIVTNU), better known as municipal surplus value, within a month from the signing of the operation.

Capital gains derived from the sale of the property

ARAG's tax lawyer, Melisa Sáez, explains that "this obligation is carried out at the time of submitting the income tax return, in the savings income section dedicated to the" capital gains or losses derived from the transfer of elements assets". Sáez indicates that "this calculation will be made based on the difference between the acquisition value at the time of purchase and the transmission value at the time the property is sold".

(TRANSMISSION VALUE - ACQUISITION VALUE = CAPITAL GAIN/LOSS)

In the event that a capital loss has been obtained, there will be no taxation, while, if a capital gain has been obtained, it will be taxed at a tax rate that will range between 19% and 26%.

These are the tax rates that apply on the basis of savings forecast for 2022:

Capital gains and losses can be offset against each other, provided that they derive from the transfer of assets. If the balance is negative, indicates the ARAG tax specialist, it will be compensated with the positive balance of the returns on movable capital with the limit of 25% and, in the event of a negative balance (uncompensated loss of capital), this amount may be compensated in the following four years under the same terms.

What peculiarity does a non-resident seller have?

The sale of a home by a person not resident in Spain implies that the buyer of the property is obliged to make a withholding of 3% on the purchase value to the seller and pay it to the Treasury. This withholding will be counted on account of the payment of income tax for non-residents.

Possible exemptions when declaring the capital gain derived from the sale

· Sale of habitual residence for people over 65 years of age.

In this case, the profit obtained from the sale of the habitual residence of a person over 65 years of age or persons with severe dependency or great dependency would be exempt from taxation by the mere fact of fulfilling any of these situations, without the need to record in the statement said operation.

· Sale of the taxpayer's habitual residence.

In the cases of habitual residence, the taxpayer can benefit from the gain exemption, provided that the total amount obtained from the sale is reinvested in the purchase of a new home that must also be habitual. However, if there is still a mortgage pending to be amortized, the amount to be reinvested will be that which results after canceling the outstanding debt with the bank.

As for the reinvestment period, there is a need to do so within a maximum period of two years, counted from date to date, which can be not only after but also before the sale of the habitual residence.

In the event that the taxpayer decides not to reinvest the entire price obtained from the sale of their home, the gain exemption will be applied proportionally to the reinvested amount.

· Reinvestment in annuities.

The law provides for the reinvestment of the amount obtained from the sale of the property in this type of financial product to obtain the exemption from capital gains. In any case, it is only planned for those taxpayers over 65 years of age.

Municipal capital gain (IIVTNU)

With the sale of the home, it will be the seller who will pay the capital gains of the property, as established by the Local Treasury Law. However, in some cases, it can also be paid by the purchasing party if they so agree between them.

ARAG's lawyer, Melisa Sáez, recalls that "the recent Ruling of the Constitutional Court, of October 26, 2021, declared the method used to calculate the base to which the tax was applied unconstitutional and null, given that it understood that the objective method of determining the tax base made situations that were truly unfair with reality".

Following the judgment of the High Court of October 2021, the Government urgently approved a new method of calculating this tax with a broader vision in which its payment is imposed whenever there is a transfer of the property with capital gain, allowing the taxpayer the choice between two calculation methods.

· Objective calculation method: according to the cadastral value. The years that have elapsed from the acquisition to the transmission will be taken into account. Depending on this number of years, a table of values ​​must be consulted that will be updated each year by the Ministry of Finance and that will define a multiplier that will be applied to the value of the land.

City councils will also have a margin to lower the tax base of the tax by up to 15%.

· Actual calculation method. It is realized according to the real surplus value. That is to say, Sáez details, "the difference between the purchase price and the sale price. If a flat has been acquired for 100,000 euros and it is sold for 150,000, the 50,000 euros of profit will be taxed as a base". Suppose that, at the time of sale, the cadastral value is 100,000 euros, of which 60,000 represent the value of the land (60% of the total).

For the purposes of the real capital gain, the increase in value will be the result of applying to the capital gain the percentage that the cadastral value of the land represents over the total cadastral value (in this case, 60%). The increase in the value that will be attributed to the taxpayer will be 60% of 50,000 euros: 30,000 euros.

As a novelty, it should also be mentioned that those who transfer a home within a period of less than one year from when they acquired it will be subject to capital gains tax, prorating the coefficient applicable to the part of the year in which it is generated. (Under the old law, capital gains were not generated in purchases and sales that took place in a period of less than one year).

Tax obligations of the purchasing party

When buying a home, the buyer will be responsible for indirect taxation, that is, the taxes that affect the value of the property. In this case, the Value Added Tax (VAT) or the Property Transfer Tax (ITP) will apply.

How to distinguish between VAT or ITP?

VAT will be applied when we are before the first delivery of housing or new construction housing. That is, when a new-build home is purchased directly from the developer or builder. It is a state tax that is paid based on the purchase price and the seller will be in charge of entering it into the Treasury.

VAT will be 10% for homes with a maximum of two parking spaces and a storage room, provided that they are included in the same deed. It may be 4% in the case of officially protected housing under the special regime or public promotion.

The Property Transfer Tax (ITP) in its modality of Onerous Property Transfers is applied in the purchase of second-hand housing or those that are carried out between individuals.

As of January 1, 2022, a new value came into play called the reference value, which is the objectively determined value for each property based on the remaining data in the Cadastre, which corresponds to the most likely price for which it could selling a property between independent parties and free of charges.

Once this point has been clarified, it will be understood that the highest of the values ​​between the reference value and the purchase value will be used as the taxable base of the tax.

However, the ARAG tax specialist points out, "in the event of having to settle the tax for a reference value with which one is not satisfied, a procedure to rectify the self-assessment may be initiated before the corresponding settlement office, providing an appraisal and requesting the return of undue income".

The applicable tax rate will range between 6% and 11% depending on the specific regulations of each autonomous community and will be presented within 30 business days from the date of execution of the deed of sale in the corresponding Liquidating Office. depending on the area where you are.

The lease is a contract by which a person agrees to cede the use and enjoyment of real estate that they own in exchange for a certain and determined price that is usually paid in the form of monthly rent. In this case, there are tax obligations for both the landlord and the tenant of the home.

What obligations does the landlord have?

The collection of rent generates annual income that falls within the so-called Yields on real estate capital and these must be declared in the general tax base of the Income Statement for the year in which they were received. However, the personal income tax law provides for the possibility of deducting a series of expenses such as community fees, IBI and rubbish tax, home insurance, construction amortization, home maintenance and upkeep expenses. .. Consequently, all these expenses inherent to the rental will be deducted from the gross rental income to obtain the net yield.

It is also worth mentioning that in the case of the dwelling that will constitute the tenant's habitual residence, the lessor may apply a 60% reduction on the net income, which will finally be the amount that will be taxed in the lessor's income statement.

And the tenant?

The lessee is also required to file the Property Transfer Tax (ITP) in the form of onerous property transfers, in which a fee is entered that will be gradual and will depend on the rent paid. However, Royal Decree-Law 21/2018, of December 14, approved the ITP exemption applicable to housing leases, in those cases of housing rentals intended for stable and permanent use in accordance with article 2 of the Law of Urban Leases, not reaching this exemption to rentals for use other than housing.