Many clients have approached us in the last year saying that they have had a letter from the Tax Office saying that their property was worth more than they paid when they bought it and so they have to pay tax on the difference. In fact, many people just brought us the letter, puzzled and we needed to explain to them. Fortunately, our existing clients that we acted for in the past year when they bought the property had already been forewarned of this as every property that we assist with the purchase in our office now we check the value on the national websites and can advise if it is possible that our clients may be hit with an additional tax to pay. Previously we were not aware of this, nor were others, and as the tax authorities can go back up to four and half years, there are clients who were unaware both when using us and other solicitors But now our clients can consider whether they feel they are getting a bargain, and be willing to pay it if it comes, or the Tax office is wrong in their particular case and consider whether they wish to proceed with the purchase. The best thing is to be aware.
So, what about all the clients who have received these letters regarding under paid property tax. Why is it happening firstly? Many people think it is because people used to under-declare when purchasing properties, but it is actually because the tax office in Spain had assigned values to all the properties in the country. When a property is purchased and sold the Tax office check the Notary´s records to see if there is a difference between the recorded fiscal value of the property and the price it was actually bought for.
If there is a big difference then the Tax office want the extra 10% tax (property transfer tax) they have “supposedly lost”. However, the crux of this situation is that these values based on the cadastral value are not reviewed very often and were fine when prices were appreciating, but after many years of crisis, now they are quite inaccurate and sometimes out of date, so a property may appear to the Tax Office to be worth far more than its actual market value.
They do not care, as of course the country needs more money, so it is an opportunity to legitimately try and recoup tax on what they see as a under declared price the property was sold at.
We have been successful for many clients in appealing these fines when it is genuinely the case that that the local tax office´s value is too high and we have been able to prove using an architect´s valuation that this is the case. We have managed to save many clients thousands of euros that they would have paid otherwise. However, it is getting more difficult and defending a client´s case or presenting an appeal is never an exact science but more a case of study, research, looking at precedents and hard work. We do our best always. So please if you have received one of these letters, or one of your friends have, please urge them to contact Amanda on firstname.lastname@example.org and we can look at your chances and if appropriate, start the process.