Fixtures and Fittings - Can They Be Excluded From The Sale Price To Reduce Tax

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31 Mar 2010 00:00 by Jaxhudson Star rating. 6 posts Send private message

We are thinking of buying in Spain and wondered if anyone can offer any advice on the following property tax issue.

In the UK it is quite normal when buying a fully furnished property to exclude these items from the sale (taxable) value of the transaction and purchase them separately, tax free. HMRC publish some guidance around the appropriate levels which you use to prevent abuse of the system.

As far as we can tell a similar transaction which was "reasonable" should be legal in Spain. We were wondering if similar guidance from the tax authorities exists and whether anyone has experience of this type of sale. 

We should stress the idea is not to buy a house for 1 Euro and the furniture for 100,000 Euro avoiding all taxes but to use the system to minimise the taxes payable by deducting an appropriate value for the fixtures and fittings which are not part of the property but are included in the sale.

Thank you.





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01 Apr 2010 01:29 by Roberto Star rating in Torremolinos. 3574 posts Send private message

Roberto´s avatar

It used to be not just very common, but expected, that property transactions were under-declared in order to avoid transfer taxes and capital gains taxes etc., and everyone involved in the process, estate agents, lawyers, bankers and even notaries accepted this as normal. Things have changed somewhat, as the government has cracked down on this tradition, and anti-money laundering regulations have become tougher. Now, if you under-declare the sale price, you run the risk of the tax department presenting you with a "revised" figure on which you have to pay tax, and possibly a fine to boot.

In the current market, I'm not too sure how anyone can determine what the actual price was in any transaction, because without doubt there are some distressed properties genuinely changing hands at hugely discounted prices. So I'm not sure how reliable this is now, but this link provides a calculator to give you the minimum value to declare. You need to enter the valor catastral (rateable value) of the property, which can be found on the IBI (rates) receipt, the municipality where the property is located, and the current year. Out of interest, I just entered my own details, and the minimum suggested value for my property is about 40% less than what I would hope it is worth, (even today, which is probably about the same as I paid for it in 2004), and probably not coincidentally, pretty close to what I declared when I bought it. Personally, I would not risk under-declaring by so much now.

As long as the tax department is satisfied that you have declared a realistic figure for the sale, I see no reason why you cannot agree with the seller, by private contract, a separate figure for "fixtures & fittings". The seller, particularly if they are Spanish, may readily agree to simply receive part of the money "black". 

I strongly suggest that you use the services of an independent lawyer to advise and guide you through the whole process.

Good luck.



_______________________

 

"First get your facts; then you can distort them at your leisure"

Mark Twain

 

 

 




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01 Apr 2010 10:36 by Jaxhudson Star rating. 6 posts Send private message

Dear Roberto

Thank you very much for that information, and for the link.  We will certainly put the info in and see what pops out as a figure.  We will certainly be using a reputable Spanish lawyer for the transaction as so far the seller just keeps advising that she has no idea of figures such as rates, community charges etc as her late husband dealt with all the financials.  A bit of a headache but I am sure we will get there!

Kind regards





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01 Apr 2010 12:11 by claire T Star rating in Torremendo, Orihuela. 699 posts Send private message

EOS Supporter

Hi - I can endorse what Roberto says - many properties are now being sold at figures below what the authorities accept as reasonable, so it is causing a headache for buyers who could potentially receive large tax bills after completion.   

I'm assuming your seller isn't using an agent as they should have compiled all the documents you need regarding bills before they listed the property.  It is vital you get all these checked before the completion as you could end up inheriting the lot!

Hope it goes well for you.



_______________________

Claire

 

 

For great value properties in southern Costa Blanca

 

www.realcostablanca.com

 




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02 Apr 2010 22:56 by Jaxhudson Star rating. 6 posts Send private message

Thanks Claire & Roberto.

Is there an equivilent link for the tax office calculator in the Alicante region ? (if there is we haven't found it although we do know quite a lot about the tax statutes now !)

Thanks again for your help.





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03 Apr 2010 09:44 by claire T Star rating in Torremendo, Orihuela. 699 posts Send private message

EOS Supporter

Hi again - for Torrevieja we multiply the catastral value by 2 - am not sure if it is the same for the whole of Alicante province though.

Regards



_______________________

Claire

 

 

For great value properties in southern Costa Blanca

 

www.realcostablanca.com

 




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05 Apr 2010 07:54 by mariadecastro Star rating in Algeciras (Cadiz). 8075 posts Send private message

mariadecastro´s avatar

 The multiplier factor ( to be applied on the catastral value) can be obtained at the Taxes liquidation office attached to the  the Land Registry office which  corresponds to the plot.

Castastral value is expressed in the IBI receipt.

 



This message was last edited by mariadecastro on 05/04/2010.

_______________________

Maria L. de Castro, JD, MA

Lawyer

Director www.costaluzlawyers.es

El blog de Maria



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