Change of use from premises to housing: Procedures and taxation
The real estate market in Spain is very difficult; building a house costs more and more and the increase in sales increases the price. That is why many people consider changing the use of premises to housing to earn money.
Indeed, in recent times and due to the increase in widespread demand for housing, many people are considering changing local use to owned housing.
Be careful, it’s a complex process and you may wonder…
What procedures should you carry out with your premises to turn it into a home?
How do you tax this transformation of premises into housing?
Procedure required to make a change of use from premises to housing
Prior urban check
If you want to change the use of a place and transform it into housing, make sure that this change can be carried out:
- Check that the deed of division into horizontal property and the statutes of the community of owners do not prohibit use as housing.
- Also check that the urban planning regulations allow the change (there could be, for example, a ban on ground floors being used for housing).
Steps to follow to make a change of use from premises to housing
- License. First of all, you must apply to the city council for the construction license and change of use (and pay the corresponding fee, if any).
You must present a project written by a technician, in which the works to be carried out are described.
- Certificate of habitability or responsible declaration. After the final work certificate, apply for the first occupation license and the habitability certificate.
- Writing and registration. With the above documentation you can grant the deed of change of use and register it in the Property Registry (if necessary, the Registry will verify that the administrative licenses and the permission of the community have been obtained).
You must also submit a declaration of alteration of use in the Cadastre.
Taxation of change of use of the premises to housing
In general, this operation has to be taxed for the property transfer tax and documented legal acts ITP-AJD.
Treasury Criteria
The Treasury recognises that the deeds of change of use are not taxed by the Tax on Documented Legal Acts (AJD) if such change does not imply a variation in the cadastral value (this will happen, for example, if the property is already listed in the cadastre as housing and the owner only wants is to “update” the existing information in the Property Registry).
This is not usually normal
But apart from this assumption, it does consider this tax applicable – between 0.5 and 1.5% of the total value of the property, according to the autonomous community – since, according to it, the requirements to demand it are met:
- The act is formalised before a notary and is subject to registration in a public register.
- In addition, it has a valuable content (the value of the property)
This is debateable.
Fight with hacienda
Well, know that some courts disagree with the Treasury.
For some, changes of use have no valuable content and are not taxed by AJD, while others consider that only the works of adaptation of the property are valuable.
According to the latter criterion, this change would be comparable to the modification of a declaration of new work already registered.
For example, if to change the use of a premises valued at 300,000 euros, works must be undertaken for 60,000 euros, the taxable base of the AJD would be the amount of said works.
The requirement of Rectification of hacienda
Therefore, if you are facing a change of use and the Treasury requires you to settle the AJD, oppose it, but do not play it.
An alternative is to satisfy the AJD on the total value of the property and then submit a corrective letter claiming that there is no taxable base of the AJD, or that at least said base must be reduced to the value of the works (and requesting the corresponding refund of undue income with interest).
In summary
According to the Treasury, the deed that documents the change of use is taxed by AJD for the total value of the property.
However, there are courts that consider that these operations are not taxed or that the tax is calculated on the value of the works carried out.
It is highly recommended to ask for help and advice from an expert architect in changing the use of premises to housing.
Sources consulted: regulations to prepare this article of change of use of the premises to housing
DGT, consultation V1033-21, of April 21, 2021.
TSJ Catalonia, of October 10, 2019.
TSJ Madrid, February 21, 2014.
