If you’re thinking of buying property in Spain, you’ve probably come across the idea of purchasing through a company to reduce transfer tax (ITP) from 7% to just 2%. On a high-value property in areas like Marbella, Mijas Costa, or Estepona, that could mean saving tens of thousands of euros.
But is it really that simple? The short answer: no — the reduced 2% ITP applies only in very specific situations, and failing to meet the requirements can lead to unexpected tax bills, interest, and penalties.
What Is Transfer Tax in Spain?
Transfer Tax (Impuesto de Transmisiones Patrimoniales, or ITP) is paid when purchasing a resale property in Spain.
- In most regions, including Andalusia, the standard rate is 7% of the purchase price.
- Certain companies involved in real estate activity may qualify for a reduced 2% rate, but only if strict legal criteria are met.
The 2% Transfer Tax — Who Can Qualify?
To benefit from the reduced 2% ITP, all of the following conditions must be met:
- Main Business Activity
The company’s primary activity must be real estate development, promotion, or a related property business — not just holding property as an investment. - Accounted as a Current Asset
The purchased property must be recorded as stock in the company’s books, not as a fixed asset or long-term investment. - Resale Within 5 Years
The property must be sold within a maximum of five years from the purchase date.
Risks of Getting It Wrong
If your company doesn’t meet every condition, the Spanish tax office can:
- Charge the difference in tax (the extra 5%)
- Add interest on late payment
- Apply financial penalties
In recent years, Spanish tax authorities have become much stricter about inspecting these cases. The reduced rate is only for companies genuinely active in the real estate sector — not for private use or investment-only purposes.
Example Scenarios
- Valid Case: A real estate development company in Marbella buys a property to renovate and resell within two years. They account for it as stock and meet all conditions — they qualify for 2% ITP.
- Invalid Case: An individual sets up a company purely to buy a villa in Mijas Costa for personal use. Even if bought through a company, it’s not genuine real estate activity — they will be charged the full 7% plus penalties.
Expert Advice Before You Buy
While the 2% transfer tax can be a genuine saving for developers and active property businesses, it’s not a loophole for private purchases. If you’re considering buying through a company, speak to your real estate agent, legal team, and a Spanish tax advisor before proceeding.
At IPP Spain, we work closely with trusted legal and financial experts to ensure your purchase is structured correctly — whether you’re buying in Marbella, Mijas Costa, or anywhere along the Costa del Sol.
Thinking of buying property in Spain? Contact us today for professional advice and access to the most exclusive homes on the market.
