Is this another good reason not to buy property in Spain

So, you have been house hunting for ages, then you find your dream home at a bargain price and you put your offer in and hey presto you are the owner of a beautiful bargain property in Spain and then what? The Spanish tax man tells you you haven't paid enough for it and he wants yet some more tax's!   I ask you - what ever next

http://www.spanishpropertyinsight.com/forums/viewtopic.php?f=2&t=5058 

A very interesting read.

Really informative, thanks Maggy.

It could only happen in Spain.....

It's a rediculous state of affairs that the authorities are trying to regain taxes in such an unfair and underhand form, from the very people they need to incentivise to purchase in their country right now.

What's wrong with identifying the fact that they need to increase taxes and be honest and upfront with their financial plans, and thereby encourage a responsible system whereby you know what outgoings you have to make preparations for?

Dear All,

could this be an attack on the under table payments?

Norman

Yes but what of the honest purchaser who has bought a "bargain" property (actually not at a bargain price but a realistic price if the truth be known)?. The fact that appeals are rarely recognised even with valuations in place, leaves such a purchaser with little option but to pay up. Basically the honest soul is paying the price yet again for corrupt practices. What's the anwer?

Norman

You are right, black money payments have all but ceased.

However,the local authorities have not adjusted their records to allow

for the  massive reduction in property prices.

I know of one successful appeal against this tax which saved the purchaser 4000 euros

Regards 

The article suggested otherwise so perhaps that was misleading if appeals are succeeding. Fingers crossed that this is true.

My feeling is that this is another piece of negative propoganda, aimed at scaring potential buyers - in this instance if the source is genuine possibly in an attempt to convince buyers of the need to employ the services of a legal firm who will help guide you through all the various possible pit falls of buying in Spain.

The main reason for this "new" system, as has been pointed out, is to eliminate the "black money" payments traditionally involved in most if not all property transactions in Spain. Surely those who bemoan the corruption that undeniably has been rife over the years would welcome such a change? But instead, they choose to see it as simply further corruption, in the form of the govt. taxing buyers on sale prices they haven't actually paid.

I haven't personally heard of anyone receiving a demand for extra tax yet, although obviously it has happened. As peteha's post reveals, when a demand is made, it is not unheard of to successfully appeal. So perhaps the article is just a little skewed to make this sound like a bigger problem than it actually is. I don't know that if a property is tennanted it significantly reduces the value (unless of course the tennant is defaulting and court proceedings are already on going, in which case you'd be mad to buy it anyway). Perhaps it is different for commercial property? And a property would have to be nigh on derelict and uninhabitable for it to be sold so cheaply as to come below the suggested minimum, whcih is usually based on a calculation based on the valor catastral (rateable value), which even now is usually well below market value.

This is just my own gut feeling, and not based on any first hand knowledge. I think it would be interesting to hear from any agents on here, who could tell us if they have any listings at prices which could be below the minimum suggested prices.

Further to my last post, for anyone with property in Andalucia, have a look at this site. Enter your valor catastral (found on your IBI receipt), the province and town where your property is located, enter 2010 as the year, and find out what your minimum declared value is. Compare this to what you could reasonably expect to sell your property for now, if you were desperate and needed to sell at rock bottom. Then let us know if your buyer could expect a demand for extra tax or not.

This was not intended to be 'propoganda' as you put it. I read a post on EOS (can't find it now) only about a week ago where a member said she had bought a house cheap and the tax office sent her an additional demand for tax as they said the house was worth more than she had paid for it, so if you can find that article you can confirm what that lady said.

This is just another example of the Government here putting their foot in the brown sticky stuff yet again! 

Hi

This has been happening for a couple of years and I was worried when we bought two years ago at a bargain price, I was advised that a way around it was to ask your lawyer to inform the hacienda before completion that the purchase was about to take place at the given price, this then would be noterised. 

I still open the mail with trepidation.

Steve

Maggy, I hope you didn't think I meant your post was propoganda? The link you posted was to the article on another well known Spanish interest site, which clearly stated that the article was sent to them by a firm of solicitors who act on behalf of foreign property buyers in Spain. I was merely suggesting that perhaps it is in their interest to publicise the potential difficulties of buying here.

I have searched for the post you mention but can't find it either - it does ring a bell though so hopefully someone else will find it and post a link.

I'm not trying to deny that this happens, but it is probably relatively rare, so to headline it as "another good reason not to buy property in Spain" or as the other site says, "The Spanish Inland Revenue 'penalises' anyone who buys a bargain-priced home ", may be just a tad sensationalist. If you need a good reason not to buy here, you need look no further than the 7% transfer tax itself. I cringe every time I hear someone moan about stamp duty in the UK!

Thanks for the website link Roberto

However,the minimum value it shows for declaration is 40% above

current selling prices.

The authorities seem to be out of touch with the current market.

Hi Roberto - in answer to yur question, yes, we have sold at least one property where the price was below what the government said it should be.  This is something we check for our buyers and we advise them if we think they may be asked for an extra tax payment.  Prices in some parts of Torrevieja and Orihuela Costa have fallen by over 50% so it is always worth checking the catastral value when we get a really good bargain.

I do think it is a response to the black money issue but find it strange that laws are based on the presumption of corruption, rather than making more of an effort to eliminate the corruption in the first place!

I don't see this as "another good reason not to buy" - I think it is just an indication of how much prices have fallen - but I would say that, wouldn't I!!!  

Unfortunately at the moment I would have thought that with the economic downturn they are unlikely to bring the figures in line with current market prices so long as they have a backdoor method of pulling in extra taxes such as this, so perhaps in the interim the reality should be more clearly identified by the sales agents, as ClaireT appears to have done. Following this line of reasoning perhaps the reality might put some buyers off but at least those proceeding will be more prepared for the tax hike.

Not that I'm advocating that this is fair, mind, but the truth should be laid bare for everyone to see.

Dear All,

given that it may take some time for reality to filter through and the general acceptance of corruption being accepted as the norm.

How should the governments financial figures be viewed????

Just how big is the real crisis???????

If this is correct for Spain...........

"I do think it is a response to the black money issue but find it strange that laws are based on the presumption of corruption, rather than making more of an effort to eliminate the corruption in the first place!"

Don't you think you may be "whistling in the dark" in seeking fairness????????

Putting people straight at the outset seems to me to be "straight trading" and is to be applauded.

Regards

Norman

Quote peteha: "However,the minimum value it shows for declaration is 40% above current selling prices".

Obviously the numbers are going to vary widely according to where and what the property in question is, and I'm happy to stand corrected. I can only say that if every one of my neighbours were to put their apartments up for sale at the minimum declaration value using the Junta de Andalucia calculator, they'd be sold before I could get to the bank to get my money out. If they offered me one for 40% less than the minimum value, I'd be more than happy to pay the extra tax. 

From reading these post it seems that Spain is not much different from UK

The subject is local and national taxation on property

Now in UK for a very long term our local taxation was based on a’ hypothetical’ rental value[RV] which by the original Statute should have been revised on a regular basis and never was due to the cost of revaluation, and the political cost of doing it

And your water and drainage rates were also based on this RV- for some older properties, which do not have meters, I think this still applies

To get away with Rates we had the Poll Tax and we all know what happened to that!

Now we have a community charge, which is based on Capital Value Bands

And these should have been re valued on a regular basis, but have not again for political reasons because the anticipated increase in Capital Value would take many houses into the next higher rate tax band- bad politics and best just to increase the Council Tax!!

So we in UK have a basically ‘ hypothetical capital value’ which is the basis of a tax system

And very high- I suggest that a Spanish buyer in UK would think they are ripped off by our Council Tax  

And this situation applies to many countries and ‘ from what everyone says’ Spain!

In the end it all comes down to the tax you have to pay compared to your neighbour

And, when have taxes ever been completely fair!!!

One of the first property taxes was a ‘ window tax’ – yes the tax paid depended on the number of windows you had in your house- on the basis that the more windows you had the more wealthy you were and the more tax you should pay!!!

Now back to Spain

The taxes on my home in Spain is a very small proportion of the taxes I pay for my UK home relative to size!

So by all means have a good moan about tax …..which is going to increase everywhere over the next few years …….but Spain ‘I would suggest’ is not as bad or no less unfair from the tax angle as UK

I have a home in Spain [ Huercal Overa] and sell homes in Spain but I am certainly not a Spanish Tax expert so your views are very interesting !

Dear All,

there are still some properties with blanked off windows which saved tax or rates at the time.

Yes the water rates "tax" is still based on the "rates" except on new properties, but many small families elect to have a water meter because of their low consumption.

But are we not confusing the Spanish "tax" which aligns with our "stamp duty" tax and is a purchase only tax and  "rates" tax or "community charge" which pays for the local facilities and seems ridiculously cheap in Spain.

Here the local authorities have balooned out of control and are a desperate drain on resources with little or no regard to public money and service.

Along with this they have mushroomed an immense elite of "senior officers" and "chief executives" with huge salaries and with an unbelievable ego culture and of course a general contempt for the masses.

It is certainly not cheap.

Regards

Norman

Norman said:

"Here the [UK] local authorities have ballooned out of control and are a desperate drain on resources with little or no regard to public money and service.   Along with this they have mushroomed an immense elite of "senior officers" and "chief executives" with huge salaries and with an unbelievable ego culture and of course a general contempt for the masses".

Well said ... and dont forget the inordinate amount of our Council Tax that is funding the retired Civil Servants too.  Not sure of exact figures but saw something on the telly that said in a few years time every UK tax payer will have to pay £4,000 per annum(yes per annum) in either direct or indirect tax, just to finace the retired civil servants.   Now before i get shouted at, i dont begrudge the civil Servants their pension, i just believe their pension should of been accrued and invested as per private pensions are.  As a colleague of mine described it the other day, its an almighty  ponzi scheme that needs more and more tax payers to finance these inordinate amount of pension payments

I would think the difference in Spain is that the local taxes actually pay for local services (like ours is/was supposed to and not all the other host of things that it  is expected to stretch to these days). 

Ps. Welcome back Norman, you were missing for a few days and i really missed your comments.

Interesting points by all.

My point was that any prospective purchaser needs to be aware of their outgoings so I was after more transparency regarding the tax realities in Spain rather than be left with a nasty shock.

Having said that I think we're all in line for some nasty tax changes in the months ahead (gulp). Better to make provision for a cushion factor methinks than proceed with any purchase that provides little room for flexibility.