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Law in Spain

Law in Spain is a dedicated Blog to advise British Expats living in Spain about their legal issues through the expertise of Abad Abogados lawyers. The main purpose of this blog is helping Expats to find useful and updated legal tips to deal with Spanish Bureaucracy.

Why that ‘bargain Spanish property’ can backfire on you with a nasty tax surprise
Tuesday, January 20, 2015 @ 1:13 PM

Expats are being warned that the Tax Office are claiming additional transfer tax, which in some cases can amount to thousands of pounds, on properties purchased during the last four years.

 

 

Expats who bought their homes in Spain at ‘rock-bottom’ prices are facing shock tax bills due to the tax office’s opinion that they are worth more than what they paid for them.

 

In their quest to raise much needed finance, the regional tax offices are looking into tens of thousands of property sales which took place during the past four years. (Click here to see more information about Property Sales Taxes in Spain)

 

Since the property market crash in 2008, Spanish house prices have plummeted by up to 50% per cent in certain areas of Spain and the country is still trying to recover from the deep recession which followed.

 

In Spain, as in the UK and other parts of Europe, the buyer has to pay sales tax on the property. In Spain this is known as Impuesto de Transmisiones Patrimoniales (ITP) and is paid as a percentage of the value of the house. The amount payable will vary depending on the type of property in Spain and its location.

 

Obviously, since the crash, and its downward affect on house prices, the amount of this tax received by the Government has reduced dramatically which has forced them to review the situation and think of a newfangled way of raising extra money!

 

The regional tax authorities are in the process of ploughing through all home sales throughout the past four years and comparing the declared sales price to that which they believe should have been the market value at the time. If the price declared varies from the taxman’s own official valuation of the property, the owner will be sent a bill for the extra tax payable on the difference - which in some cases can amount to thousands of pounds.

 

 

To give an example, Mr & Mrs Simms, who bought their dream retirement home in Murcia in 2012 were billed for an extra 5,356 euros in sales tax ,almost three years after buying it. The couple who had searched for over two years to find the right property were delighted when they managed to find the home that they wanted and even more so when they managed to negotiate the price down to 95,400 euros.

A few weeks later, they paid the tax (ITP) over to the authorities, which amounted to 6,678 euros.

 

Then about four months ago, out of the blue, they received a letter from the local tax office claiming that in their view the house was actually worth £171,927 and that the couple should pay the extra 5,356 euros.

 

The couple went to the tax office as they presumed that there had been a mistake, but they were told that they had no other choice but to pay it.

 

That is when they came to see us at Abad Abogados. We appealed against the initial decision made by the tax office, and continued to a second and finally a T.E.A.R appeal before their decision was overturned, resulting in no further tax being paid by The Simms.

 

If you have received a letter from the tax office and are unsure of what you should do, or if you are just concerned about your situation knowing that you bought during the period under review, then we at Abad Abogados can help you. You can contact us on www.abadabogados.com for further infotmation about buying a property in Spain.



Like 2




37 Comments


Hephaestus said:
Tuesday, January 20, 2015 @ 3:50 PM

It appears that the Spanish revenue are adopting a make it up as they go along system, I hazard a guess that there is more to this than meets the eye.



 





sandra said:
Tuesday, January 20, 2015 @ 7:02 PM

And was their legal bill more than the 5356 euros demanded?



AbadAbogados said:
Tuesday, January 20, 2015 @ 7:24 PM

Ha, ha, ha..nooooo

On these case Abad Abogados propose a no win no fee basis with a minimum provision of funds to cover initial fees.

That´s means we charge a percentage of the money we save for the client only if we win and when case is finished.

No surprises, no more expenses and satisfaction guaranteed!


paul said:
Saturday, January 24, 2015 @ 7:15 AM

another Spanish rip off
local tax office drumming up business for legal firms?
why did they not get get the original legal firm who handled this to sort it out?


Penny said:
Saturday, January 24, 2015 @ 7:34 AM

This is not just typical of Spain (although they do seem "good at it). Finance laws and taxes are usually in favour of the Government but when the economy takes a dive or someone outwits them they change the policy, again to be in favour with the Government again. The man-on-the-street can rarely win as the tax gets you in some form and they want X amount from everybody. So they will dream up new taxes or raise existing ones! In fact one of the main reasons we left UK was the "stealth" taxes. Of course I now realise that EVERY GOVERNMENT wants 60+% of your wealth so they can waste it on enquiries, expenses, civic dinners and keeping them in employment. it'll will never change.

Great to hear though of the successful outcome to the Simms case but we shouldn't have to fight like that. Well done though.


midasgold said:
Saturday, January 24, 2015 @ 8:18 AM

Was the tax guy - Sr. Arfur Daily ?


Feeg said:
Saturday, January 24, 2015 @ 9:47 AM

I bought a clapped out apartment in a clapped out building in Estepona, paid the taxes and thought I could live happily ever after. No chance. After spending 50K tarting the place up I got a bill from the Hacienda for 8K Euros. On appeal which was rejected, and required the services of an abogado and an architecto, I was another 1000 Euros down the tubes. Still, I recommend anyone getting one of these tax demands to contest it; it would be interesting to know how many of these so called "reassessments" are in the Costas compared to other parts of the country where foreigners choose not to tread.


oscar said:
Saturday, January 24, 2015 @ 9:54 AM

Downright thievery..any property is only worth what someone buys it for..based on supply and demand..the principal of a capitalist society. We decided against Spain because of these issues. RENT don`t BUY!!! Then the Spanish Govt would get what it deserves!!


steve said:
Saturday, January 24, 2015 @ 10:26 AM

DISGRACE ! THIS COUNTRY IS SADLY RETURNING TO A DICTATORSHIP AND AUTHORITIES JUST DOING WHAT THEY WANT ! .. ITS GOING DOWN THE PAN . HOW ARE THINGS LIKE THIS AND DICTATING NOW WHAT RENTAL OWNERS SHOULD PROVIDE IE AIR CON ETC GOING TO ENCOURGAE PEOPLE TO INVEST AND STIMULATE THE ECONOMY . WHY CAN THEY NOT SEE THAT THEIR ACTION IS NOT THE SOLUTION AND ACTUALLY HAS A HUGE NEGATIVE EFFECT SO LONG TERM THE COUNTRY LOSSES OUT TO OTHERS ,,, SHAME ON THE HACIENDA ETC !!


jackie said:
Saturday, January 24, 2015 @ 10:55 AM

we had to pay around 3000euros 2 years ago, they had been chasing us but had sent all the letters to the wrong fiscal rep, they were nearly ready to freeze our bank account so we paid it from advice from our then legal rep. Despite paying a small amount to contest it she has said its not worth it due to legal fees etc, if anyone can help us get it back please let me know!


miketait1 said:
Saturday, January 24, 2015 @ 11:21 AM

Unfortunately this new approach is partly predicated on the fact that for years some purchasers under declared the purchase price , paying the difference to the vendor in cash and thus avoiding tax.

You can understand why they have done it but it does assume we are all potential fraudsters!


michael budd said:
Saturday, January 24, 2015 @ 11:35 AM

I purchased an apartment in La Duquesa in 2012 for 125.000€. Six months later I received a bill from the Hacienda for 9500€....they re valued the apartment at 260,000€!! My Abagado advised me to appeal, which I did, and got a re valuation for 55,000€ requiring a payment of 2500€ whichbi reluctantly agreed to pay. Basically, the abagado messed up, he thought he didnt have to do anything, and the money would be taken from my account.....wrong, he should have written to the Hacienda and accepted the re valuation. So now the timescale to appeal was passed and the bill reverted back to the origional figure...9,500€. I couldnt pay, so my bank accounts were embargoed, I moved back to the UK as I couldnt survive without having a bank account. Eventually, last November, I borrowed the money, now about 12,500€ with interest, oh, and got a bill from the Abagado for 3500€ for his services...thanks!


Annie said:
Saturday, January 24, 2015 @ 11:36 AM

Will Spain never learn. Treating buyers like this is certainly going to make more and more people afraid to buy over here. Spain has become a place where the innocent are targetted and to defend themselves is often more expensive than just paying up. Spurious traffic fines, on-the-spot fines for having an EU (rather than Spanish) licence and now this extortionate bogus tax to name but a few. No wonder so many are leaving or, like me, want to leave.


michael budd said:
Saturday, January 24, 2015 @ 11:36 AM

Sorry....re valuation was 155,000€ ...not 55,000€


Hephaestus said:
Saturday, January 24, 2015 @ 2:33 PM

As has been said previously, there is probably that much 'black money' changing hands that the Spanish revenue assume that everyone is in on the act.


derek55 said:
Saturday, January 24, 2015 @ 3:53 PM

Typical of the get the foreigner culture.
Any trick they can pull to make someone else to pay to cover their own inefficiencies.




Lizzie said:
Saturday, January 24, 2015 @ 4:47 PM

I have often wondered how we can escalate such things to the European Courts so they can wave a big stick at Spain saying "no way Jose!" A property is only worth what a buyer is prepared to pay for it. In Spain at the moment, that is "not a lot". How can they decide a "worth". I would say, find me someone who will pay it if you think it is worth that. They can't right now because Spain is on it's knees financially. I wonder why? We all know why, because of things like this. No-one owes Spain a living, they have to pull themselves out of this hole themselves, not try to rob residents and non residents,... because people will leave if they can. The European Courts help I think, but how do we lobby the European Courts, I wish I knew because if I could I would do it. There are lots of issues in Spain, inheritance tax is wrong, this ridiculous non residents tax is wrong. There should be IVA on letting a property not a standard charge e.g. non residents tax in the assumption that you should let it because you don't live in it. This is 2015 Spain please feel free to enter the 21st century sometime soon!


Hephaestus said:
Saturday, January 24, 2015 @ 5:24 PM

I agree with what Lizzie says, but must add that if you don't like the way that a country runs it's affairs, why live/buy there?

I'm told that South Africa is a lovely country, however I couldn't have stomached apartheid, and don't much fancy it's current violent crime statistics.

The UK revenue is not without it's faults, since last year they haven't allowed personal visits to their offices, and play never ending recorded messages if you attempt to contact them by phone. However I am confident of eventually getting a result to my liking, unlike you guys in Spain.


Ken said:
Saturday, January 24, 2015 @ 5:48 PM

I have been trying to run a small agency on the Costa del Sol for many years and whilst I do love the weather if I had my time again I would not be here.

All the time the government/municipals, especially the Junta de Andalucia make rules/decree's which basically target agents, simply because we are easy to find and therefore fine!

Everyone is right, a property is only worth what someone is prepared to pay for it, yet some civil servant sits on his/her arse in an office and picks a figure out of the air or based on something which was sold years ago and determines that is the figure to base their taxes on. I would love that person to come and work for me and for them to actually achieve those prices, I would have a bunch of very happy vendors for sure.

The thing is, they will not provide you a figure until AFTER the buyer has purchased, how ironic is that, therefore your lawyer will not be able to find out, even an independent and registered valuer will add a disclaimer so you have no recourse against them.

Why the Spanish government and the junta's fail to realise they are actually sitting on a goldmine with the costa property market is beyond anyone who possess even half a brain, instead they work on the basis of charging more and providing less.

Reduce the transfer tax to a sensible figure of 5% or less, treat people fairly i.e. residents and non residents, Spanish and EU citizens the same along with all their other taxes and clients will come flocking to buy property! Further more and guess what, their tax coffers will be full with the increased revenue!

However don't listen to me as I am only one of many who knows what he is talking about instead of the politicians who do very nicely thank you for the period of time they are in office which is also spent securing their own future as opposed to the prosperity and security of the people they are supposed to be representing!

It is not rocket science, however whilst we are being controlled by corrupt, stupid politicians and civil servants, progress and prosperity will continue to grind to a halt!

There should never have been a recession, especially on the Costa del Sol, it has only been the corruption, increases in taxes (which are directly connected by the way) and discrimination which have caused the problem.

European Union, what a joke, Spain has and always will have it's own way of ripping people off!

We have been battling with a Spanish developer for over 8 years who owes us money. We have won numerous court cases, even the final one at the High Court and have still yet to receive any money, however he still operates his business which is generating substantial revenue, Yes we know our next action is the European Court which again will cost us a shed load of money but why should everyone always have to go to such lengths in this country, quite simply because he is Spanish and we are not!

I rest my case.


Tony said:
Saturday, January 24, 2015 @ 6:17 PM

We purchased our property in 2012 at a price of 78,000 Euros and paid the appropriate tax. 6 months later we received another bill for 6,100 Euros as the property was valued at 165,000 Euros. At the time we had not been told the time limit to apply for a revue of the price was 28 days so anyone falling into this trap, make sure you apply as soon as the demand arrives.


ads said:
Saturday, January 24, 2015 @ 7:33 PM

Do law firms as part of their due diligence include comparison checks of existing cadastral values against current purchase price, and where they differ widely then forewarn the client of extra taxes?
In that event would they be able to request a reassessment of cadastral value for their client PRIOR TO PURCHASE, which would pre-empt any "nasty shocks" requiring further legal action?
In other words delay purchase until such time as the cadastral value is in line with current values thereby saving the purchaser from having to take legal action AFTER THE EVENT.
The impact of concerted action to delay purchase in this way by all those wishing to purchase in Spain would swiftly impact the market and make regional governments intent on retrospective actions of this nature possibly rethink their tactics?
One thing for sure is that these retrospective actions sadly only reinforce purchasers' insecurities and makes one wonder where the next retrospective action will fall.
Crazy psychology to employ on a market place trying to encourage growth. A self defeating tactic I would have thought....
By the way, the new EU justice commissioner is Vĕra Jourová and her contact details are here: http://ec.europa.eu/commission/2014-2019/jourova_en/




Ken said:
Saturday, January 24, 2015 @ 8:14 PM

Regarding "Ads" comment, there is no public registry in Spain where you can simply go and check pricing, if there was it would be fantastic as it would save us the trouble of trying to convince 90% of owners that they are asking too much for their property.

Whilst I have a fantastic lawyer whose work ethics are amazing you try and find any other Spanish lawyer to do any more than they have to and you will be doing well.

To show how bad things are working with the Spanish, especially Andalucians, I always try and get our clients to use our lawyer, WHY? not because of what the media says that any lawyer who is recommended by an agent is only looking after their interest and not the clients, it is because lawyers have started to actually steal clients.... yes you heard right "steal" clients! When a client goes to a lawyer to start the purchasing process, quite a few now try and steer the client towards a property they know about so they can also get an agents fee, incredible I know but trust me, it is happening.

The same is also happening when a client goes to a bank for a mortgage, the banks now try and steer the client to one of their bank owned properties where they will offer them a better deal on a loan.... it has to be experienced to believe I know!

The Spanish make these rules because it is them who are corrupt, the amount of listings I walk away from because the Spanish owner is always insisting they get paid some "black" money i.e. cash under the table!

However it is not the Spaniards which get targeted or punished, it is the foreign buyers who 90% of the time do not want to pay any cash!

It would be VERY easy for the government to set up a simple registry for what price properties have been sold for as every deal has to go via a public notary but they do not, so you form your own conclusions as to why they don't like most other countries!

Having said that, EVERY buyer is looking for a good deal and a bargain and it should be up to the buyer and vendor to negotiate a price which they are both happy with, not for some government civil servant to make a figure up and then tax someone accordingly. If you actually say to people that is how they determine the taxes they would laugh but that is exactly how they do it!

As I previously mentioned, these muppets should get off their highly paid arses and try and sell the properties for what THEY say they are worth as opposed to what someone is actually prepared to pay!

Look at Michael Budd's example, he bought for €125,000 in La Duquesa and the government muppet valued the property at €260,000...lol

Then after spending more money to contest that figure they re-evaluated it at €155,00.... how can that person be in a job for Gods sake??????

Even then they have revalued the property 24% higher than what it was worth which is what Michael was prepared to pay and more importantly what the owner was prepared to accept, solely to get more money as they are not content with receiving what is already a ridiculous 8% transfer tax!

Like I keep saying, if it wasn't for these stupid corrupt people the Costa del Sol property market would be booming and would never have gone into recession!

The area relies on only two form of industry, tourism and real estate and the authorities have made an excellent job of ****ing both up!

I think Vëra Jourová is going to be inundated with e-mails and messages after your post..lol


RobbieRob said:
Saturday, January 24, 2015 @ 9:50 PM

So I wonder about people who bought at HIGH prices, if they'll get a refund?

Wont hold my breath.


Tor B said:
Saturday, January 24, 2015 @ 11:15 PM

The latest ruling of the Supreme Court in Valencia have in fact determined that an inspector from in all cases shall appraise houses before tax value is determined.
This never happens, so several persons that have brought cases as above to the court has succeeded and won their cases.


Graeme said:
Sunday, January 25, 2015 @ 5:23 PM

Your article suggests this is something new but in fact it is not!

When anyone buying a property in Spain uses the correct legal process they can determine the tax value of the house. So if you are within this value you will not have issues in the future.

Once again all the info about Mr and Mrs Simms misfortune has been given but it does not say if they used a lawyer and more so an estate agent, can the author of the article clarify this please?

I look forward to your reply.

If they had used either then they should have been advised accordingly.

Regards
Graeme


AbadAbogados said:
Sunday, January 25, 2015 @ 6:25 PM

Dear Graeme,

The reality is that the prices that Banks are Resales have been crossed on past year are frequently lower than the value that the Tax Authorities establish, this is why now we are observing a massive number of "Comprobaciones de Valores".

Our Law Firm, on their process of Auditing always review which are the prices according with the Regional Authorities and advice to our clients who are totally aware of the risk they are taken, but sadly we have noticed that neither all lawyers nor all estate agencies act like that.




AbadAbogados said:
Sunday, January 25, 2015 @ 6:30 PM

Dear Ads and Ken,

This rule affects to any person or company who purchase in Spain, being Spanish or not, being resident or not, so I can´t see there is nothing to do with the European Courts, at least from the point of view of discrimination.

Besides your lawyer can check which is the tax value of the property so any owner can be aware of potential problems and decide to pay more taxes from the begining, or to prepare an adequate evidence of the condition of the property when transferred (survey done by a Qualified Spanish Architect, etc.).




Martin said:
Sunday, January 25, 2015 @ 7:49 PM

Thank goodness I rented whilst I was in Spain for 2 years.

That's my advise to anyone considering a life in Spain. Rent out your UK property and rent a home in Spain. It's far less risky that way. You also have the option of renting in different areas until you are sure about whether Spain is the right place for you to live. And, renting in Spain is so cheap! :-)


Ken said:
Sunday, January 25, 2015 @ 9:02 PM

F.A.O. Abadabogados,

Firstly, why don't you name who you are as opposed to just the legal firm you represent.

Secondly, why even mention the services of a "Qualified Spanish Architect" in relation to the condition of a property being purchased, I do not recall the condition of any property being questioned and more importantly its relationship with regards to how much tax is to be paid!

Finally, as a typical lawyer, you ignore the simple fact that a vendor has agreed a price to sell his property to a buyer, therefore that price is what the property is "ACTUALLY" worth at that moment in time, only for some civil servant to determine otherwise for tax purposes.

An interesting point made by Robbie to which I do not know the answer, has anyone received a transfer tax rebate due to the same civil servant declaring a property was actually worth less than what they paid for it?.... I very much doubt it don't you!

Whoever you are at Abadabogados, if you were instructed by a purchaser to verify the tax value of a property, are you prepared to pay the difference if the "actual" figure turns out to be higher?

Maybe you should try the sometimes impossible task of selling property, you find a client and then find a vendor of a property they want to buy, the two parties agree a price only for the deal to be blown out of the water because a civil servant has determined the property is worth more than the agreed selling price and therefore they will be forced to pay more should they still wish to proceed

Correct me if I am wrong but is that not a dictatorship?

As also previously mentioned, these people should try selling property, then and only then will they be able to establish the true value of said properties!

What happened in relation to the capital gains tax being 35% for non residents and I think it was only 16% for residents, was that not discrimination which had to eventually be sorted at the European Court?

At the same time and whilst the government were ordered to repay the difference I am also on the understanding that it was left to people to find out about this ruling as opposed to them being notified, which again would have been a very easy thing to do with all transactions being conducted at a public notary and therefore records and the relative people would be easy to find!

To this day I am sure there are still thousands of people who were due that rebate who will never receive it but guess what, none of them are Spanish!


AbadAbogados said:
Sunday, January 25, 2015 @ 9:19 PM

Dear Ken,


This blog is made by Abad Abogados to give diffusion to Spanish Law. Abad Abogados is formed by a number of Lawyers, and the article are prepared by them, this is why we are not putting a personal name. For more information you can visit our web page.

Please notice that we are Lawyers, we don´t write the law, and we don´t think the law is fair or not, we simply advice on the current position of the law in order to obtain the satisfaction of our clients, this is our purpose.

We have won a lot of cases about this matter to Spanish, British, Australian, and dozens of nationalities, and obviously, nobody could consider that is fair a rule that force to sign a Public Deed on a price which could or couldn´t be real, but buyers should know about that before to do it.

The mention to the Spanish Architect is because the law of application allows an agreement between the Architect of the Tax Office and the Architect of the Buyer under some circumstances.

Considering the number of post of this article, obviously is an issue that interest to a lot of you and we though that is worth to warn to buyers who receive that notification that they can do something about it, that they can give fast that notification to their lawyers and their lawyers could challenge that. That´s all.

We will write other day about the Capital Gain Tax, rebates, etc. but it´s not the issue for today.

Hope you enjoy more of our articles on this blog and keep contributing!





Hephaestus said:
Monday, January 26, 2015 @ 9:35 AM

Just an honest observation, I well recall a visit to Calella de Palafrugell in 1975, I noticed a construction site with an advertising hoarding offering 2 bed fully furnished and equipped apartments for under £2,000, not much tax to charge on them.

Village houses and countryside property could be had for a song in those days, I wager that the average Spaniard conducted part cash in hand deals as a matter of course, the revenue most likely only earned money on properties purchased by the very wealthy.

Foreign purchasers pushed up up property prices to ridiculous pre-crash levels, the revenue must have thought that all their birthdays had arrived at the same time. I guess that what with the property market stagnating and prices crashing they have taken a very heavy hit. The British in particular have always danced to the Spanish government's tune, I reckon that they will moan a lot, but still pay up, after all Spain is such a wonderful place to live. isn't it?




Steven Manderville said:
Thursday, January 29, 2015 @ 8:00 AM

Love the country,but don't like the way it's run..
That's why I will not buy back in Spain.
SM


Karl said:
Thursday, January 29, 2015 @ 5:25 PM

i got also a letter to pay 3100 Euro tax on top of what i paid allready. My lawyer told me i have to wait another letter on which they give me date and amount to pay.
Did anyone know, if this is correct? will i get another letter in which they ask me to pay this amount. otherwise this 28 days allready gone, because i got this letter 0n 22.12.2014....



Hephaestus said:
Thursday, January 29, 2015 @ 6:43 PM

Our family solicitor has just quoted our son £2,540.00 inclusive, in respect of the sale of his apartment and the purchase of a house here in the UK. The difference between costs in the UK and Spain are immense, and with no nasty surprises in respect of the UK.

Why is this?




selva said:
Saturday, February 14, 2015 @ 12:01 PM

I bought a house last April, went to the bank with my solicitor (recommended by the estate agent) and was told to pull out 5,000 euros in cash, the rest a bank transfer. My escritura states that I paid 5,000 euros less for the house than I actually did. I wonder what happened to this cash.I am thinking that maybe i'll get a letter soon to tell me that the property I bought is valued far higher than what I paid. I am trying to communicate with my solicitor but she won't answer my emails.


Keith said:
Saturday, February 14, 2015 @ 6:54 PM

The Spanish are their worst enemy.
Why cant they see that they are killing the golden goose?


Harry said:
Thursday, May 14, 2015 @ 11:37 AM

Are the local Spanish people liable to the same laws on the purchase of properties - so called plus valia and is there or haws there been any involvement from europe


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