Buyers of second hand homes pay a tax (ITP) of up to 10% of the purchase price to the Treasury but could pay more if the sale price is less than the minimum value of the property as recorded on the property deeds.
The tax varies across the country. For example it is 7% in Madrid and Andalusia but is 10% in Valencia and Catalonia. Normally, there isn't a problem but recently the number of cases in which the Treasury requires the buyer to pay more than they did initially has been growing, according to property advice firm the Spanish Brick.
Spokesman Daniel Talavera said that this is due to the fact that even when the actual price paid for the purchase of the home is put on record in the public deeds, the value that the administration puts on the property is much higher because it has not been revised as prices have fallen.
‘It means that there a clear lack of adaptation between the actual property prices trend variable and the statistical valuation done by the administration during the best years of the housing market,’ he explained.
The business says that this is increasing with buyers who have bought properties at bargain prices as the autonomous communities have some minimum price tables and on top of them they calculate the minimum ITP that a person has to pay when they buy a house.
‘In the case of the buyer paying a higher tax nothing happens, but if the regional government thinks that the sale price has been too low the authorities demand an additional payment on top of the ITP,’ he explained.
The firm’s advice is that a buyer should check the tax situation with the Comunidad Autonoma (regional administration) where the property is, and ask about the valuation that the property has with the administration. ‘Then you will know what level of taxes will be payable, you will be able to plan for the tax, and, most importantly, you will avoid getting a subsequent claim from the Tax Office,’ he added.
He pointed out that those who don’t do their homework can find themselves in a situation where, after paying a tax of 10% of what they have paid for the house, the Treasury demands the payment of an additional tax.
For example, a home bought for €200,000 would have an ITP due of €20,000. But if the Treasury records show that the property has a minimum price tag of €300,000 that would mean an ITP of €30,000 and the buyer would have to pay the difference of €10,000 plus interest.
‘Minimum prices are generally lower than the sale price, but with the crisis in mind and in places where the price of a property has fallen a lot, there are more and more cases in which things don't happen this way,’ said Talavera.
He added that it is possible to appeal against the extra tax. If a buyer has paid an ITP lower than they should a notification is sent out. ‘From the time that you receive the notification, you will have a period in which you can explain why the price paid for the home is lower than that calculated by them as the minimum price,’ he said.
Arguments such as poor maintenance, tenants or a ratings report from an independent expert which shows that the actual market value of the property is less than what the administration says it is can be used.
