Costa del Sol's Property Specialists

2014 Brings Reductions in Taxes on Existing Homes - Madrid

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Reductions in Taxes

Ignacio Gonzalez, the Madrid Community President, has opened 2014 with an announcement that the transfer tax (ITP) levied on the purchase of used homes will go down by one point leaving the general rate at a constant 6%. In addition, the stamp duty tax has been lowered by 25% thus helping potential buyers with their taxes, mortgages and notarized documents when buying a new home.

This announcement makes the community of Madrid to have the lowest ITP in Spain, with Andalucia remaining at 10%, and Catalonia has seen an increase from 8% to 10%. The most expensive ITP rate in Spain is Extremadura at 11%.

The stamp duty tax is another benefit for residents in Madrid as this general rate has been reduced by 25%, meaning it has gone down from 1% to 0.75% compared to 1.5% in regions such as Andalucia, Catalonia and Galicia.

Personal Income Tax Reduced

Ignacio Gonzalez also announced that the personal income tax rate for the regional government will also be lowered by 1.6 points. Gonzalez said that "the money is better in the pocket of the citizens" and even though this policy will reduce the tax burden, “it will not affect the amount of taxes collected”. This new measure will be incorporated in the draft budget for 2014. The decrease by 1.6 points in the regional section of the personal income tax will, as calculated by the regional government, create an additional savings of 216 million Euros a year to Madrid. Add this to the decrease of 1.6 points, which applies for six years, there will be a overall saving of 376 million Euros, almost 125 Euros per taxpayer per year on average.

As local sources that are close to the proceedings pointed out, lowering the personal income tax will leave a top marginal rate 51.5%, the lowest of all regions if you compare to 56% in Catalonia, Andalusia and Asturias.