Spain halves the IVA/VAT on new property until the end of the year.

The Spanish Government has announced it is to reduce the IVA/VAT on new property from 8% to 4% as an emergency measure in force until the end of the year. It comes in an attempt to reactivate the real estate sector, and only applies to new property. It means an average saving to the purchaser of about 8,000 €.

The real estate industry think the idea will help to reactivate a sector punished by the recession, but comment that it will also be necessary to give ‘better access to finance’. Other experts think it will have a limited effect coming as it does just 13 months after the Government increase the IVA/VAT rate on new property by 1%.

The Prime Minister will appear in Congress on Tuesday to explain the decision which was discussed in cabinet on Friday. The Government says that there is 700,000 empty new property for sale in Spain currently.
Despite the idea the Minister for Tax and the Economy, Elena Salgado, said the Government’s policy remained to try and stimulate the rental sector.

The Government hopes to save 5 billion € in the other measures discussed, including bringing forward the payment of company taxes on 3,900 companies which turn over more than 20 million € a year. The measure is intended to stay in place until 2013 and is designed to ensure the Government meets the 3% deficit target for the end of that year.

Also doctors are to prescribe the active ingredient in a medicine and not a brand name; a measure forecast to save 2.4 billion € a year. The idea has already been put into practice in Andalucía where savings this decade of 500 million have been made.


The Stock Market lost another 5.8% this week, after another ‘black week’ and a fall of 2.11% on Friday to take the IBEX 35 to 8,141.9.
Renewed concerns about a second recession and problems for the banks crossed the Atlantic from the United States to Europe. The EU idea of a Tobin Tax on financial transactions has not gone down well either. The IBEX has fallen 20% over the past year.
The risk premium between German and Spanish bonds ends the week at 286 points with an interest rate of 4.9%.
The volatility on the European markets was of especial note given the low volume of stocks being traded.

The Eurozone is reported to be considering taking over the running of the countries which break through the debt targets in what amounts to a ‘partial abandonment of budgetary sovereignty’.
The Belgian Finance Minister said that the Eurozone is planning for countries to finance 40% in Eurobonds, and 60% by themselves.

Self employed shopkeepers and small family businesses have seen their first slight recovery in sales in two years, but still face problems obtaining financing. Their associations have asked for zero tax on such businesses in small villages.

The Spanish Prime Minister met with the Pope on Friday to discuss the economic situation. José Luis Rodríguez Zapatero promised the Pontiff that he will ‘apply the adjustments adopted in Spain efficiently’.

 

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