VAT on New Homes: Everything You Need to Know 2026

Buying a home is one of the most significant moments in many people's lives. However, the purchase process involves not only negotiating the price and selecting the perfect location, but also understanding the various associated costs, including Value Added Tax (VAT). This is one of the best-known taxes, as it is levied on almost all transactions carried out in Spain. The tax rate is not the same in all cases; it varies depending on the product or asset in question.

What is VAT on new homes?

Value Added Tax (VAT) is an indirect tax on consumption that applies to most commercial transactions in Spain. In the case of new homes, VAT is applied to the sale of properties that are considered new- r under construction, i.e., those whose first use occurs after the completion of their construction. This regulation is relevant in order to differentiate between the purchase of a new home and a second-hand home, as the tax regime is different.

The VAT applicable to new homes in Spain is 10% of the sale price. This percentage is a fundamental aspect to consider in the total budget allocated to the purchase of a home, as it will directly impact the final cost that the buyer will have to pay.

How is VAT paid on a new home?

VAT on the purchase of a new home is generally paid at the same time as the signing of the deed of sale before a notary. At this point, the buyer must pay 10% of the sale price of the home, which will be added to the total amount payable. It is essential that buyers plan for this expense in their budget before purchasing the property.

Once paid, VAT must be settled by the seller with the Tax Agency, which will be responsible for managing the amount collected. As a buyer, it is crucial to ensure that you receive a proper receipt documenting this payment, as it will be necessary for any subsequent tax procedures that may be required.

How much VAT is paid on a new house?

The amount of VAT paid when purchasing a new home (10%) depends on the sale price stipulated in the contract. For example, if the price of a home is €200,000, the corresponding VAT would be €20,000 (200,000 x 0.10). Thus, the total amount that the buyer must pay is €220,000.

It is important to note that, in practice, the cost of VAT can be a significant burden for buyers, which could affect their financial decisions. Therefore, it is advisable to consider this tax burden within your financial capacity when taking out a mortgage or financing the purchase.

How do you reclaim VAT on a property?

Recovering VAT on a new home is an issue that normally only concerns certain buyers, especially those engaged in business or professional activities. In this context, buyers can deduct the VAT paid on the purchase of goods that will be used for economic activities.

To recover VAT, you must file the corresponding return with the Tax Agency, provided that you can justify the appropriate conditions for the deduction, such as the use of the property for business purposes.

However, for the vast majority of buyers, it is important to understand that there is no VAT "recovery" as such if the property will be used solely as a primary residence. In this case, VAT is considered just another expense in the purchase process.

In summary, the only case in which an individual can deduct VAT after purchasing a home is when that home is used for business activities that generate economic returns.

What VAT rate applies to second-hand homes?

In the case of second-hand or resale homes, the tax framework changes. In this context, VAT does not apply, but rather the Property Transfer Tax (ITP). The rate of this tax may vary depending on the autonomous community, although in general it ranges between 4% and 10% of the price of the home.

‍

Are there any exceptions to paying VAT on a new home?

Yes, there are some exceptions and special cases regarding VAT on new homes. Although the standard tax rate is 10%, there are certain situations that must be taken into account:

1. Social housing (VPO): Properties classified as social housing can benefit from a reduced VAT rate of 4%, provided they meet the requirements established by law.
2. Purchases by non-profit organizations: these entities can enjoy a special regime that allows them to benefit from a reduced rate when purchasing new homes.
3. Purchases by construction companies: in certain cases, construction companies may also be subject to special regulations that affect the VAT applied.
4. If the property has been rented: firstly, for a period of two years or more and the owner of the property is still the developer who built it. In this case, it is considered a second transfer.
5. If the property is purchased from a bank: in this case, the bank would be considered the first owner, and the property would then become a second-hand home.

It is crucial that buyers are informed and advised about these exceptions, as they can represent considerable savings in the costs associated with purchasing a new home.

Who has to pay VAT on a new home?

Generally, the buyer is responsible for paying VAT on the purchase of a new home. However, this aspect can become a point of negotiation during the purchase process. In some cases, the seller may assume this cost as part of the negotiation, although this is not very common.

What is essential is that the buyer is aware of their tax obligations at the time of the transaction. Ignoring this detail can lead to financial and tax complications in the future.

‍

What other taxes are paid on a new house?

In addition to VAT, buyers of new homes should take into account other taxes and expenses that add to the total cost of the purchase. Some of the most relevant are:

1. Stamp Duty (AJD): this tax also applies to the purchase of homes and the tax rate may vary depending on each autonomous community. It is also known as mortgage tax.
2. Notary fees: these fees are necessary to formalize the deed of sale before a notary. Notary costs depend on the value of the property.
3. Registration fees: once the documentation has been signed, the purchase must be registered, which will also generate additional costs.
4. Appraisal: Banks may require an appraisal of the property, which also entails an additional cost in the process.

In summary, when calculating the total cost of purchasing a new home, it is essential to consider all these taxes and associated expenses, in addition to VAT.

‍

Are you looking for new alternatives to invest and diversify your income?

‍

Invest easily and affordably with Domoblock, an innovative platform that combines blockchain technology and high returns at your fingertips. With Domoblock, you can participate in leading real estate projects through tokenization, allowing you to diversify your investments without the need to invest a large amount of money. Discover all our investment options and choose the one that best suits your financial goals!

Conclusion 

Buying a new home in Spain involves a number of tax considerations, among which VAT plays a crucial role. Understanding how it is applied, how it is paid, and what other implications it has is essential for making informed decisions and avoiding unpleasant surprises on the way to your new home.

From the applicable tax rate, which is currently 10% for most new homes, to the exceptions that can reduce this burden, every buyer must be aware of their tax liability. In addition, it is important to consider other taxes and associated expenses in order to have a complete picture of the outlay involved in the purchase.

With all this information at your disposal, you will be better prepared to tackle the process of buying your new home, ensuring that every aspect, including VAT, is under control. Finally, it is always advisable to seek professional tax or legal advice to ensure that you comply with all the regulations and requirements in place. Good luck with your house hunt!