The Spanish government has cut the rate of VAT (IVA) payable on new build properties by 50%, effective immediately. The rate will reduce from 8% to 4% and will be applied to all new build properties sold until the 31st December 2011.

José Blanco, Spain’s Minister for Development, and Economic Vice President Elena Salgado, made the decision to cut the rate of VAT by 50% from 8% to 4% with immediate effect, following a ministerial meeting on 19^th August. The reduction is to be in place with immediate effect…

“With this measure we intend to dispose of the ‘stock’ of unsold homes and reactivate the construction sector where there is potential demand,” said Blanco during a press conference – he went on to say that he was confident the initiative would have a “very positive” effect.

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 thousands of Euros on the purchase of their new property)

There are also other benefits to this 50% 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.

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.