Has anyone had their purchase tax refunded? We paid this on completion in September 2008. Since moving to Spain, neighbours are saying that if the house was for permanent residence we should not pay purchase tax.

I wish!

I'm not sure exactly what you mean by "purchase tax" but the two taxes you pay on buying a property are either IVA at 7% if you buy new from a developer, or the transfer tax of 6% plus, in both cases an additional documents fee of 0.5%. This can be higher depending on where you live - in Andalucia it's 1%.

In neither case are there any rebates because it is you principal residence.

The only time that makes any difference is when you are looking at CGT or IHT.

However, if you are tax resident you can claim some of the cost of buying your principal residence against income tax. It's not a huge amount but it is a deduction of 15% of the cost up to a maximum cost of €9015 giving a rebate of about €1300. If you have a mortgage you can treat this as a continuing investment and get up to that amount every year.

Hey Fred,

Do you know if it is only capital part of your mortgage repayments that are deductable against your income tax, or is it the capital and interest?

Thanks

It's the whole payment.

The reason for it is that the tax deduction is for an "investment" in your principal residence so the total mortgage payment is considered to be an investment.

This is a different view on the situation compared to the UK where (when mortgage tax relief was allowed) only the interest was claimable because it was seen as an expense of ownership rather than an investment in the property.

Fred, the tax they call 'Hacienda', currently 7%, - is that what you refer to as transfer tax?

Presumably this is only payable when a property is transfered between owners and is not applied when one changes mortgage?

Yes, that's what I was referring to. It's called ITP - Impuesto de Transmisiones Patrimoniales.

As far as I know, the only taxes you pay when changing a mortgage are notary and registration fees plus anything the bank can dream up to screw some more money out of you!