The tax key comes into play to unlock the market

In the midst of the growing housing crisis in which more than half a million houses are needed to balance the market and where prices are absolutely fired, different economists and experts have agreed to point out one of the large levers to reverse the into the thus: taxation, an aspect to study in the document of measures for the state housing plan, currently in public consultation. The sector calculations reveal that 25% of the price of a home are taxes (VAT, the Patrimonial Transmissions Tax and Documented Legal Acts –ITP-AJD–, the Tax on Constructions, Facilities and Works -Inicio- and the Municipal Tasas).

Given this tax deployment, families see how the purchase of housing is complicated, while discouraging investment … which does not seem to contribute to relieve the housing deficit. This is what the National Construction Confederation (CNC): “To reduce fiscal burden around the construction, promotion and sale of homes, we propose to reduce tax rates (when not eliminating any of the tax figures that tax the process, which are more than fourteen), and implement bonuses in the ITP or the IBI, such as, for example, for the purchase of a home in the rural environment.”

They add the suitability of implementing a guarantee program for young people to guarantee the entry and concession of mortgages for housing acquisition and generalize the update of the modules of housing plans.

The institution describes the example of a land seller who has to pay the IRPF for the heritage gain obtained by difference between the purchase price of the land and the sale value; «While the seller must satisfy the City Council for the tax on the increase in value of urban lands (IVTNU); Then, the promoter must enter the purchase of the land an amount from the Autonomous Administration by the Tax on Patrimonial Transmissions and Documented Legal Acts, in the Forosas Heritial Patrimonial Transmissions Modality (TPO). Although the tax base is the reference value, the purchase is taken because it is greater ».

Regarding the buyer, CNC recalls the payment of the Real Estate Tax (IBI), the accrual of the Patrimonial Transmissions Tax, in the modality of documented legal acts (AJD), the liquidation of the tax on constructions, facilities and works (ico), more fees for granting of license, fences, ford, card of first occupation, occupation of streets, urban certificate, the VAT… Tax figures and types is urgent if it is intended to multiply the offer to relieve the severe household deficit in Spain and moderate prices for rent and purchase ».

Contrast of opinions

The National Federation of Real Estate Associations (FAI) has requested, on the other hand, to reduce the ITP to 2.5% «To buy first regular homes not luxury and 4% for the purchase of general housing, following the Euskadi model as a necessary measure to facilitate access to the purchase of first home with a fairer taxation and remove pressure from the rental market, in a tax rate of 67% above the European average». They allude to an overrun of 25% “that affects the buyer, so both the central government and the regional governments, within their powers, must articulate efficient and applicable measures in the short term to balance the market.”

However, from Gestha, technicians union of the Ministry of Finance, they point out how “the reality of the number of real estate operations recorded in the historical series demonstrates that the amount of taxes has a relatively low incidence in the transmissions.” And this are verified in the box of the housing sale number since 2007, based on data from the National Institute of Statistics-INE: “It is observed that after the maximum of 2007 and the sinking of the real estate market, housing sale shows a clear incremental trend since 2014, except for the impact of the pandemic in 2020.”

In the European context, they point out how «Spain occupies, according to the data of Eurostat, the 7th position in the EU ranking of the taxation of the different annual taxes on real estate, just two hundredths percentage of the eurozone average, and five of the average of the 27».

Local, global

In the case of Eurofunding, International Consultant of Public Financing, Generation of Fiscal Savings and Development of Sustainable Projects, its spokespersons Carmen Lizana and Dámaso Hornero, point out how «the fiscal burden on the sale and possession of a property in Spain is very high. So much so that, from the EU countries, only France has a fiscal burden in this area superior to that of Spain ».

They remember the aforementioned tax obligations, from the municipal to the national, as in the case of the increase in value of the lands of an urban nature (30%), “which taxes the increase in value that the land of the property has experienced during the years of possession of the same. This municipal tax has a potentative character, that is, the municipalities have the power to establish or not the requirement of the same in its territory, and the type of tax to be imposed, the maximum being 30%. It is an annual collection of 1,205,933,000 euros (according to the data provided by the Ministry of Finance in the ‘Local Finance in Figures report. 2022’), since the vast majority of consistories have decided their management and imposition.

This whole series of variables makes, in the opinion of Eurofunding specialists, “currently, access to the real estate market is very difficult, requiring a high economic capacity, to acquire a property, to keep it in personal heritage, with a heterogeneous tax burden, since it will depend on the municipality and autonomous community where the real estate is acquired or transmitted.”

View to the future

They add, in the European context, the concept of ‘Cross -border taxation’, «By which the principle of free circulation of capital forces States not to exercise any discrimination to the residents of other EU countries. Moreover, the EU Court of Justice has come to intervene to prevent discrimination in the taxation of real estate operations towards non -residents ». More Europe: «The drop in interest rates by the European Central Bank from next summer will encourage the purchase of homes by lowering mortgage loans. But no tax reform is expected to reduce the tax burden in this regard, such as a decrease in tax rates or an extension of existing tax benefits ».

This scenario of tax obligations has had recent contributions such as the session held by the General Council of Economists of Spain (CGE) and the Foundation of Applied Economics Studies (Fedea), to analyze the factors “that have led to access to housing, for rent and in property, to a complicated situation (with special attention to the problem of the offer) and in the definition of possible measures to introduce improvements in this regard.” Regarding the present of the future of real estate taxation (one of the numerous issues raised with margin of improvement), institutions affect the importance of “reducing fiscal burden on housing, through the decrease in taxes such as VAT, ITP-AJD, ICO and licensed fees.”