Update 25 August: The Canarian Government has today announced that it is following the mainland’s lead and reducing IGIC, the Canarian equivalent of VAT, on new-build properties from 5% al 2.75% providing first that the properties are for use as primary residence, and secondly, that the property is being purchased for less than €150,000.
These qualifying details are intended to help those in most need who are trying to buy a main home for themselves rather than an investment.
The reduction will come into force as soon as the Regional Parliament has approved the legal project sent to it by the Canarian Government. It will remain in force until 31 December 2012, a full year longer than the mainland’s measure, which expires at the end of December this year. PV
Original post 19 August: There is a story that is being reported HERE in the BBC as well as in the Spanish press and since it’s readily available in English, I thought I’d better post about it in case someone sees it and misinterprets it.
The story concerns Spain halving its tax on new property purchases throughout the remainder of 2011 in order to help sales … but not in the Canaries. There is a reason for this, however, and it has nothing to do with discrimination.
There are two taxes payable on property purchases. The first is a 6.5% tax (Impuesto sobre Transmisiones Patrimoniales) on resale properties: it is essentially a transfer tax payable on transfer of title, rather than a sales tax.
The real “sales” tax in Spain is payable on new property, and this is IVA (Impuesto sobre el valor añadido), effectively the same as our Value Added Tax (which is what “valor añadido” means). It is being halved from 8% to 4% for the remainder of this year.
In the Canaries, however, buyers of new builds do not pay IVA at all. Rather, they pay the specific Canarian tax IGIC (Impuesto General Indirecto de Canarias) at the rate of 5%. (For new properties a document registration tax … AJD – Impuesto sobre Actos Jurídicos Documentados … of 0.75% is also payable).
So, this is not discriminatory as IGIC is set by the Canarian Government, not Madrid, so cannot be halved by the national Government as IVA has been. Moreover, at 5%, IGIC is already considerably lower than the mainland’s 8% IVA.