In real estate transactions, the choice of a preliminary contract has not only legal implications but also significant tax consequences. Analyzing the differences between an option to purchase and "arras penitenciales" from a tax perspective is crucial for both parties involved.

1. Tax Implications of an Option to Purchase

An option to purchase is an agreement that grants the buyer (option holder) the exclusive right to acquire a property in the future. For this right, the option holder pays an initial amount called an option premium.

• For the Seller (Grantor):
  • Tax Accrual: The option premium is the key point. As it is a payment for a right, its tax accrual is immediate, at the time the contract is signed.
  • Property Transfer Tax (ITP) or VAT: The option premium is subject to taxation. If the seller is a private individual, the premium is subject to ITP. If the seller is a company or developer, the premium will be subject to VAT, which may imply a tax adjustment in their quarterly declaration.
  • Personal Income Tax (IRPF) or Corporate Tax: If the sale is ultimately formalized, the premium is considered an advance payment of the total price. However, if the option holder decides not to exercise the option and the contract expires, the premium becomes a capital gain for the seller, who must declare it as part of their income.
• For the Buyer (Option Holder):
  • Property Transfer Tax (ITP) or VAT: The option holder must pay ITP on the option premium if the seller is a private individual. If the transaction is subject to VAT, the buyer will pay it to the seller, and may be able to deduct it in certain cases.
  • Deductibility: In the event that the option is not exercised, the paid premium is not a deductible expense or an asset that can be fiscally offset.

2. Tax Implications of "Arras Penitenciales"

"Arras penitenciales" are an agreement by which a sum of money is delivered as a guarantee for the conclusion of a sale, with the possibility for either party to withdraw from the agreement in exchange for a financial penalty.

• For the Seller:
  • Tax Accrual: The main tax nuance of earnest money is that the amount delivered is not taxed immediately. It does not generate a taxable base at the time of delivery, as it is a guarantee and not a payment for a right. The taxation is postponed until the public deed is signed.
  • Personal Income Tax (IRPF) or Corporate Tax: If the buyer defaults and the seller keeps the earnest money, that amount is considered a capital gain that must be declared.
• For the Buyer:
  • Tax Accrual: The buyer has no tax obligation on the earnest money at the time of delivery. The amount delivered will be part of the total price and will be taxed as part of the transaction at the time of the public deed.
  • Forfeiture of Earnest Money: If the buyer withdraws and forfeits the earnest money, this amount cannot be offset as a capital loss or deducted for tax purposes.

Conclusion

The main tax difference lies in tax accrual. The option to purchase requires taxation on the premium from the moment of its delivery, which can create an upfront tax burden. In contrast, "arras penitenciales" postpone taxation until the sale is completed. This distinction is fundamental for planning the cash flow and tax strategy of both parties. The choice between the two will depend on the desired legal security and the financial and tax planning of each party.