The Spanish government recently approved VAT increases in Spain to take effect as from 1st September 2012.

The standard rate of 18% increases to 21%. The reduced rate of 8% rises to 10%. The super reduced rate of 4% remains unchanged.

However, the purchase of a new property in Spain is currently governed by the super reduced 4% VAT, an extension to the law passed in January running through till the end of 2012 made by the present conservative government, after the previous social government introduced a reduction in August of 2011 from 8% to 4%.

As the purchase of a new property originally belonged to the eight percent VAT group, and since this will increase in September, the 4% VAT concession upon a new purchase that runs out on 31st December (2012) will now rise to 10% as from 1st January 2013.

Stocks of unsold new property in Spain are still very high, but with only 4 months to take advantage of the current reduced rate of VAT, it is unlikely that the levels of stock will drop significantly. But, it is an opportunity for those who can.

This temporary situation will only help those developers who still have unsold new stock still in their possession which hasn?t been taken over by a bank. It?s worth noting that this situation won?t help in any great measure either the stock held by banks, as both re-possessed properties and those from a developer are considered as at least a second transmission of the property and are not governed by the VAT tax.

In the case of resale properties, the tax levied is not VAT but a government transmission tax of 7% or 8% (Impuesto de Transmisiones Patrimoniales), depending on which autonomous region the property is located, and is not expected to change, for the moment.