50% REDUCTION ON VALUE ADDED TAX DERIVED FROM NEW PROPERTY PURCHASES

Starting from 23rd May 2012 until the end of the year, the Government shall apply a 50% reduction on all value added tax derived from the purchase of a property, according to the Council of Ministers. This measure was announced 4 days ago at a press conference by Ana Pastor, Public Works & Development Minister, following the Council of Ministers. This implies that whoever purchases a property starting from today will receive a 50% reward bonus for any eventual value added tax generated by the sale of the same. The reduction applies to both individuals and corporations. The tax cuts therefore affect both individual as well as corporate tax returns. However, purchases made between parents and children will not be entitled to benefit from this measure. The change in policy is focused on revitalizing the anemic Spanish housing market as well as facilitating the sale of stock accumulated in the banks’ balance sheets, which is currently eroding their profit and loss accounts. Anyone who purchases a property as a second home will be able to benefit from this measure. At present, individuals are subject to 100% exemption on value added tax upon selling their main home. This will therefore optimize a stock clearance of all second homes (apartments on the coast etc.) and will aid large investors, speculators or profit-seeking property purchase bonds. SOURCE: MARTINEZ ECHEVARRIA I PEREZ I FERRERO ABOGADOS www.martinezechevarria.com