Spanish VAT: New Rules for Mortgaged Property Transactions

The Spanish Tax Agency (AEAT) has changed its criteria regarding the application of the reverse charge mechanism for VAT in the transfer of mortgaged properties.
The change affects situations where the buyer retains part of the purchase price to pay off the mortgage.
Previously, the AEAT considered that the reverse charge mechanism applied in such cases.
The new criteria, based on rulings from the Central Economic-Administrative Tribunal (TEAC), limits the application of the reverse charge mechanism to situations where the transfer is a direct consequence of the execution of the mortgage guarantee.
This includes cases like judicial or extrajudicial auctions, the creditor taking possession of the property in payment of the debt, or the buyer expressly assuming the mortgage debt.
If the sale is made without formal execution of the guarantee, even if the buyer retains part of the price to pay off the mortgage, the general VAT regime applies and the reverse charge mechanism does not operate.

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.