Government Approves Reduction of the "IVA" tax (VAT) on New Build Spanish Properties from 8% - 4% until 31st December 2011

The move was announced in late August by the Spanish Minister Jose Blanco, in a seemingly desperate attempt to breathe life into the flagging Spanish construction sector.  Mr Blanco also stated that he believed that the measure would help the sale of new build properties as there was a "potential demand" to tap into.

However, whilst the lowering of VAT on new build properties will be welcomed, it offers little hope to property owners who are looking to sell their own homes as the reduction will not apply to resale properties.  Furthermore, nor will it apply to Spanish bank repossession properties, where a bank has taken the properties directly from the constructor responsible for their development.

Michael Gledhill, Managing Director of Ideal Spanish Property, whilst welcoming some action from the government, considered the move to have taken too long.  "It is good that positive action is being taken to support the Spanish construction industry, but it has come a few years too late for most developers over here" stated Mr. Gledhill.  "Had the move been taken earlier, it may have prevented some construction companies from going into administration.  As it stands, it appears to be a reactionary move against many months of stagnation in the construction sector."

Mr. Gledhill also noted that buyers should be aware of the time period to take advantage of the tax break was short. "As the reduction in VAT only applies until 31st of December, those looking to purchase will need to do so quickly.  As things stand the tax will go up again in less than 3 months time, and since most property transactions take 2 - 3 months to complete in Spain anyway, those looking to invest would need to move quickly to make their savings".