New IVA (VAT) Tax Cut Incentive on New Built Homes – Will it cause a huge increase in the sales of Spanish Properties in the next four months?

An IVA (VAT) Tax Cut Incentive on New Built Homes was revealed by the Spanish Government on the 19th of August, 2011. There will be a Tax Cut of 50% (from 8% down to 4%) on the Value Added Tax for the purchase of NEW BUILT PROPERTIES. This Tax Reduction will be in effect ONLY until December 31, 2011, and has been put in place to regenerate Spanish Property Sales as well as to help reduce the stock of Spanish Unsold Newly Built Properties (close to 700,000 properties in Spain). This tax reduction does not apply to newly renovated properties.

UPDATE
The new government that took office on January 1st 2012 has decided to leave this 4% on new builds until 31st December 2012.

Effective 1st September 2012 the VAT was increased from 8% to 10% on re-sale properties

This IVA (VAT) Tax Cut Incentive on New Built Homes, will, in all probability, motivate existing purchases to complete sooner rather than later, and it will most definitely benefit two groups, namely …

… DEVELOPERS - (who will now have a chance to finally shift their unsold properties) and

… BUYERS - (who will save several thousand Euros on the purchase of their new property)

There are also other benefits to this Tax Reduction on IVA (VAT):

… It will create employment in the Construction Sector, which has been badly affected by the recession, and …

… It will help the Construction Material Supply Market to increase their sales.

Also, with this Temporary Tax Cut Incentive in place, the following could take place:

… It may cause some progress in the Property Market with New Build Properties becoming more reasonably priced, and

… Because this 4% reduction in VAT (IVA) will come to an end on December 31, 2012, there could possibly be a flood of Spanish Property Sales before the expiration date. This would most certainly prevent some Agents from going out of business.

But, when you think about it, although this temporary Tax Reduction Incentive is welcomed and, there are some benefits to be had, perhaps a reduction on All Properties, not just New Built Properties, would have proven to be even more constructive in improving the present Property Sales Market and boosting the current Spanish Economy.

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