On 1 June 2004 I signed five separate private agreements with a developer for the purchase, purely for investment purposes, of properties under construction.

My intention is to resell the properties “off-plan” before building is completed. For this reason the private agreements include the possibility that the future public deed to be signed upon delivery of the finished property may be granted either in my name or that of any third party named by me.

I have been told that sales of property in Spain between private individuals are subject to Transfer Tax.

Could you please tell me if this would be the case in the scenario described above, that is, if I re-sell before the property is finished and before signing the relevant public purchase-sale deed?


Unfortunately, yes.

The transfer of rights contained in a private agreement signed by an individual who purchases a property under construction, to a third party, the latter being the party who ultimately appears as the purchaser in a public purchase-sale deed, is subject to Transfer Tax payable by the final purchaser.

In accordance with the criteria adopted by the Spanish tax authorities in order to determine the taxable base applicable, this should coincide with the real value of the property transferred.

This means that if an individual signs a private agreement to purchase a property off-plan and pays a deposit, then subsequently, before the construction has been completed and the property delivered, he sells his rights to a third party for a sum of 50,000 euros, when the sale price initially agreed with the developer is 200,000 euros, in principle, the tax authorities could assess Transfer Tax payable calculated on a taxable base of 200,000 euros, instead of 50,000 euros.

Although we consider that this treatment is unreasonable, this seems to be the criteria adopted by the Spanish Tax Authorities currently. Accordingly, it must be said that although this operation does not necessarily have to be granted in a public instrument or registered in the Land Registry, this does not mean that it is not subject to payment of Transfer Tax.