Spanish Tax Office Perverts Truth to Raise More Taxes on Property Transactions

May 28th, 2011

About to wind down for the weekend, yesterday evening I received an email from Alexandra Goss, personal finance reporter for the Sunday Times, in relation to a few enquiries sent by Spanish property buyers, and sellers, that were unexpectedly receiving letters from the Spanish tax office challenging the prices at which they had bought, and sold, their properties in Spain, respectively.

Indeed, one thing came to her mind considering the state the Socialist Government has left Spain in: the Spanish Tax Office (AEAT) is desperate for revenue and are finding avenues to levy extra demands for transfer tax from property buyers, and so, if the Spanish property market was not an already depressed sector of Spanish economy, they now come, as real predators, to make it even harder for people to buy, and sell.

This is the real paradox of it all: the Spanish Interior Minister flies out to England to do his silly property-selling road show, and in Spain, those buyers get shafted by the Inland Revenue his Government controls. The good thing? That courts are, mostly, not contaminated with the wrong ideology and will employ reasoning and logic to counteract this property-buying prevention scheme, and will mostly, again, throw out of court these extra tax demands.

What should one do if one receives one of these letters, after of course all the understandable cursing and imprecating? Well, go get a lawyer that knows his stuff and appeal within the stipulated timeframe, by choosing one of the 2 legally available avenues:

Challenge the “unreasoned”, “standardized” valuations made by the tax office that happen to be nothing else than some formulas being applied on unknown coefficients by a computer program that pumps out wholly impossible valuations (a 2-bedroom flat on a 200-unit empty development in Manilva worth €280,000?). The funny thing about this is that University graduates sign off these valuations, knowing that they are essentially wrong and untrue (land registrars in most of Andalusia are in charge of the Transfer Tax collection, and/or “arquitectos tecnicos” employed by the Andalusian Government, the same graduates that think that the property is twice as expensive!).This is what the courts in Spain think about these predatory extra tax demands:
- Supreme Court 14^th December 1998: The valuation carried out by the architect for the Tax Office is a standardized printed form full of scant references that have the weight of an opinion rather than that of a property valuation, and therefore one cannot assume it has any reasoning or justifiable criteria, losing its legally binding effect.
- Economical Administrative Tribunal 20-06-1995: The legal mandate granted to the Tax Office to raise supplementary tax demand fails due to the Tax Office not following a logical process when arriving at property values but rather by using abstract figures when calculating these. Also, the Tax Office fails to properly provide a valuation when they simply perform arithmetical calculations on the basis of a unitary basic module, without reasoning or justification, and certainly can never comply with the law when to this value or figure, a stereotyped all-purpose text is added on as reasoning. (Tantamount to calling the “arquitecto tecnico” a dumbass).
Carry out a proper valuation by a proper “arquitecto técnico”, or as they don’t like to be called, “aparejador”, who will surely determine that the property’s real value is either the price you paid for or sold it for, or perhaps less, and submit it, hoping that the “arquitecto tecnico” working for the Tax Office will abide by the norms of ethics of their profession and admit to being wrong. Because the funny thing here is that, depending on whether these university graduates work for you, or the Tax Office, their opinion of what the quoted property is worth will be €140,000 or €280,000, respectively. It´s funny, certainly, but it is also very worrying.

This subject matter is very very interesting, and so expect some interesting, and surprising, developments very soon, including a legal suit against the Andalusian Tax Office.

Anyhow, check tomorrow the Money Section in the Sunday Times, I am quoted there.