Increase in the ITP in Catalonia: Changes and Key Points to Consider

The Government of Catalonia, currently led by the Socialists’ Party of Catalonia (PSC) in coalition withEsquerra Republicana de Catalunya (ERC) and the Comuns,has approved a modification of the Property Transfer Tax (ITP). This reform introduces new progressive tax brackets and establishes a 20% tax rate in certain cases.

Previous Situation

Until now, the ITP in Catalonia was structured in two brackets:

• 10%: For properties valuedup to 1 million euros.
• 11%: For properties valuedabove 1 million euros.

New ITP Structure in Catalonia

With the approved reform, the brackets are now:

• 10%: For properties up to 600,000 euros.
• 11%: For properties between 600,000 and 900,000 euros.
• 12%: For properties between 900,000 and 1.5 million euros.
• 13%: For propertiesover 1.5 million euros.

In addition, aspecial 20% tax rateis introduced in the following cases:

• Large property owners:Those who ownfive or more homes in high-demand areasorten or more in low-demand areas. When acquiring new homes, they will be taxed at20%.
• Purchase of entire buildings: The acquisition of entire buildings, with or without horizontal division, will also be subject to the20%ITP rate.

Impact and Application

These new rates primarily affect buyers ofhigh-value homesand real estate investors with portfolios of multiple properties. The measure has generated diverse reactions in the real estate sector, especially regarding the increase in the ITP to 20% for large property owners, which some believe could affect investment in housing.

Effective Date

The reform was approved onFebruary 27, 2025, and will come into effect onApril 1, 2025. All transactions formalized after this date will be subject to the new tax rates.

Goals of the Reform According to the Legislator

The Government of Catalonia justifies this measure as a mechanism to:

• Increase fiscal progressivityby taxing higher-value transactions more heavily.
• Raise more public revenuefor housing policies and social services.
• Limit real estate speculation, particularly in areas where access to housing is considered strained.

Criticism and Position of the Opposition

Various parties and sectors have expressed opposition to the measure. The main criticisms focus on:

• The impact on real estate investment by increasing the tax burden on property transactions.
• The potential increase in rental market prices if large property owners pass the higher tax costs onto tenants.
• The lack of consensus, as it was approved with the support of the PSC, ERC, and Comuns but opposed by other parties.

Considerations for Buyers

If you are considering purchasing a property in Catalonia,it is advisable to evaluatehow this reform may affect your transaction. Some suggestions:

• Consult with a tax or real estate advisorto analyze the impact of the new rates.
• If the transaction is already planned, consider closing the purchase before April 1, 2025,to benefit from the previous rates.
• Explore tax optimization alternativesdepending on the buyer’s profile.

Conclusion

The recent reform of the ITP in Catalonia introducesnew tax bracketsand a 20% rate for large property owners and the purchase of entire buildings. The measure has been driven by the PSC government in coalition with ERC and Comuns, and has generated mixed opinions in the real estate sector.

Its effects on the market are being debated, soit is crucial for buyers and investors to stay well-informed about these changes before making property decisions.