For the correct identification of the Spanish taxes derived from the purchase of a plot or land intended for construction, several factors must be taken into account:
- Tax status of the seller
- Tax status of the buyer
- Nature or urban classification of the land or plot
- Nature or urban classification of the construction
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Purchasing a plot of land in Spain for construction can be an excellent investment opportunity, but it also comes with important tax implications that vary depending on several factors. Misunderstanding the nature of the land or the profile of the seller can lead to costly mistakes or tax inefficiencies.
In this article, we break down the key factors that determine the applicable taxes when buying a plot or land intended for construction in Spain, whether you are a private individual or a developer, a Spanish resident or a foreign investor.
Nature of the Seller
Understanding whether the seller is a private individual or a professional/entrepreneur is key to identifying the applicable tax.
Private Seller (Natural Person)
When the seller is a private individual who is not acting as a professional, the transaction is generally not subject to VAT, but instead to Transfer Tax (Impuesto de Transmisiones Patrimoniales, ITP).
However, exceptions arise when the seller is promoting or urbanizing land. According to Spanish VAT Law (Ley 37/1992), individuals who urbanize or develop land are treated as entrepreneurs. If they sell urbanizable plots during the development process, the sale becomes subject to VAT at 21%.
*Important: Always assess whether the seller is classified as an entrepreneur due to land development activities, even if they are a private individual.
Entrepreneur, Company or Professional Seller
When the seller is a company, a professional, or an individual acting as an entrepreneur, the tax treatment depends primarily on the type of land being sold.
Type of Land or Plot
Urbanizable or Buildable Land (Solar)
Includes:
- Plots with building permits or licenses
- Land under urban development or infrastructure works
- Land with buildings under construction (except agrarian, demolished or ruinous structures)
In these cases, the transaction is subject to VAT at 21%, regardless of the buyer’s profile.
** If both parties are professionals, the buyer may apply the reverse charge mechanism, declaring the VAT themselves (autoliquidación).
Rustic or Non-Buildable Land
Includes:
- Agricultural land
- Protected land
- Land for public use (parks, roads, etc.)
Here, the sale is exempt from VAT but subject to ITP. However, the buyer may waive the VAT exemption if they are a deductible VAT subject (typically a business or professional), and opt to pay VAT instead of ITP. This can be beneficial when the buyer wishes to deduct input VAT.
** Tip: Check if there are local tax reductions for ITP, especially for young buyers, companies investing in rural areas, or primary residences.
VAT vs Transfer Tax (ITP)
| Type of Land | Seller Type | Tax Applied | Rate |
|---|---|---|---|
| Buildable / Urbanizable Land | Entrepreneur | VAT (optional ITP) | 21% |
| Buildable / Urbanizable Land | Private Individual | ITP | 6–11%* |
| Rustic / Non-Buildable | Any | ITP (default) | 6–11%* |
| Urban Land w/ Construction | Entrepreneur | VAT (reverse charge) | 21% |
*The ITP rate varies by Autonomous Community (e.g. 6% in Madrid, 10% in Catalonia or Andalusia).
**VAT is national and uniform across Spain.
Non-EU Buyers: Double the Cost?
In several regions, non-EU buyers face higher ITP rates or lose access to regional tax reductions. For example, in some communities:
EU residents under 35 may benefit from a reduced ITP of 5%, while non-EU residents pay the full 10%.
Some regional deductions are exclusive to tax residents in Spain or the EU.
* Always verify regional legislation or speak to a local legal expert when buying from abroad.
Tax and Form Obligations for the Buyer
If VAT Applies: The buyer pays VAT (21%) on the invoice.
If reverse charge applies, the buyer declares VAT in form 303 (boxes 12 and 13), while the seller does not charge VAT on the invoice.
If ITP Applies: The buyer must submit form 600 and pay ITP within 30 days of signing the deed.
Rates vary by region and may depend on the buyer’s age, purpose, or investment status.
Seller’s Tax Reporting: Entrepreneurs report VAT in form 303 and form 390.
The sale may also be declared in form 349 if it’s an intra-community operation.
The seller must issue an invoice without VAT if the sale is exempt, stating the legal grounds (e.g., Article 20 of Law 37/1992 or RD 1619/2012).
Conclusion: Get Legal Advice Before You Buy
The taxation of plot purchases in Spain is not uniform and depends on multiple variables:
- the seller’s legal status,
- the urban classification of the land,
- and the buyer’s ability to waive VAT exemption.
Before signing a reservation or purchase contract, it’s essential to carry out a legal due diligence and consult with a tax professional to identify:
- Whether VAT or ITP will apply
- What rate and amount is payable
- Whether the transaction qualifies for any tax incentives or reductions