Complimentary tax requested by the Taxman

I purchased a property in Ben Havis, Nr Marbella, Spain in August of this year. The value of this property was 305,000.00 euros. The sellers needed a quick sale and we purchased for 225,000 euros for the actual property and 25,000 for the fixtures and fittings, a total of 250,000 euros. We are being asked by our lawyers for a "complimentary tax" of 7% of the difference of the valuation and the actual purchase price. I would be grateful if you could let me know if there is such a tax, when it became law and if there is anything we can do to appeal against this tax. If there is such a law should our solicitors have made us aware of this? I would be very gateful of your help as this is a very worrying time for us. Thanking you for help in matter. D.E.

Dear Sir,

This is not a "new tax" as you label it.

Quite simply the Spanish Tax Office has understood you underdeclared the real price of the property you purchased. That's why they are requesting the 7% Transfer Tax difference between the declared purchase price in the Title deed and the "real" price they think that property is worth according to their own books and values.

Nowadays we are seeing how many people sell their properties as distressed assets and actually sell their property below the price of their Title deed. The Spanish Tax Office has no way of knowing, and besides doesn't concern them, the truth on why the vendor is selling his property below it's market value or declared. In Spain it is difficult to understand selling below the value of the Title deed.

All the Tax Office knows is that the said property is worth 300,000€ and you have purchased it for 225,000€. It will suspect you paid in "B" money (cash) the difference so as to waive the 7% Transfer Tax on the 75.000€.

This can be avoided by your lawyer who will request from the Tax Office a binding value prior to completion of the property. So in this case the taxman cannot demand the difference in tax (complementaria) if the price is above said minimum binding value.

EDIT:

We have created a Property Value Calculator to help people avoid this problem you mention with the Taxman (it gives you an estimate of what the Tax Office thinks your property is worth). It is only valid for AndalucÃ*a region. If your property is outside AndalucÃ*a this tool will not be useful to you. We will be expanding this tool for the rest of Spain in the future.

Are you aware of anyone being successful with approaching the Tax authorities and getting a binding valuation on a property? Also is there an up to date Property Valuation Calculator available please?

I am buying a property for €255,000 from Bank but the Valor Catastral is 276,000. Since I am buying direct from the bank I am hoping that the Tax Authorities will accept that no B money is changing hands and that is the real price I am paying. However, I am not looking forward to the protracted discussions after the purchase to prove that is actually the price paid for the property and would like to avoid this by getting the tax authorities to agree to a binding valuation as you have indicated in an earlier post.

Hello,

As you mention, we have said in a previous post that a binding valuation can be requested from the Tax office; however, in our experience we have to say that this has not resulted to be very practical as it takes a very long time and it is in most probability that they will eventually refer you to Central Administration ( Junta ) that will give you the same fiscal value the tax office has.

If you are buying below the minimum fiscal value you will eventually have to pay for the tax on the increased value; 8 % of the difference between the 255.000 € and the minimum fiscal value ( not valor catastral, that is different to the Valor Minimo Fiscal ) that could be more than 300.000 € . If your property is located in the Malaga province we can easily check this for you.

Please feel free to contact me by email, by clicking on my profile.

Regards,