First and foremost, despite the tax system in Spain not favoring investors and buyers, the tendency of prices does, and to this extent, there are always legal paths for reducing the charges in a “generous” way.
Let us go to the point:
When a person buys a second hand home in Spain ( no a newly built which will be applied the Spanish VAT instead of the ITP), he or she has to pay up to 10% of the purchase tax that figures into the corresponding deeds to the patrimonial transference tax (ITP). The percentage varies according to the Autonomous Community: 7% in Madrid and Andalusia, 10% in Valencia and Catalonia.
Normally, there isn’t any anomaly, but recently the number of cases in which the Treasury requires the buyer to pay more than they did initially has been growing.
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 of said home has is much higher, because it has not been revised with the same speed of the fluctuations of the price that the current housing marking has produced. That is, 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 housing prosperity.
We are seeing this case especially with buyers who have found flats for low prices, or bargains. The reason is that 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 charge that was already satisfied by the buyer.
Before deeding a flat, you should inform yourself about the administration of taxes from the Comunidad Autonoma (Regional administration) where the property is, and about the valuation that the property has with the administration. Then you will know what expenses the payment of taxes will mean for you, you will be able to plan on the tax, and, most importantly, you will avoid the fear of getting a subsequent claim from the Tax Office.
The Undesirable Tax Office Notification
Whoever buys a second-hand home and is not well informed 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 from the ITP. Said tax will be 10% of the difference between the value that the house was deeded for and the minimum value that the home has in the eyes of the Treasury, plus interest corresponding to the delay of payment.
For example, if we buy a home for 200,000 euros, we would pay 20,000 euros for ITP. If in the Treasury records, they figure that this home has a minimum price tag of 300,000 euros, and that this number corresponds to a minimum ITP of 30,000 euros, they will make us pay the difference: 10,000 euros plus interest.
When we are interested in buying a home that, perhaps due to the crisis, has been substantially reduced in price, it’s worth knowing that the minimum value is as per the Treasury, in order to pay the corresponding fees and to not have surprises or claims later on. Minimum prices are generally lower than the sale price, but with the crisis in mind and in places where the home has fallen a lot, there are more and more cases in which things don’t happen this way.
Can a claim be filed with the Treasury to not have to pay “more”?
When you deed the home for under the minimum stipulated by the Treasury and you pay an ITP lower than you should, the Tax Office will notify you of the tax that you owe for the difference. From the time that you receive the notification, you will have an argument period in which you can dispute why the price paid for the home is lower than that calculated by them as the minimum price.
Typical disputes that you can argue are: poor maintenance, homes bought with tenants (which reduces their value), or providing a ratings report from an independent expert who shows that the actual market value of the property is less than what the administration says.
But, in any case, having the appeal admitted and being saved from paying the “extra” for the tax is highly unlikely and will only be obtained in very justified cases, so you shouldn’t count on it ahead of time, because although the Treasury “respects” the fact that you find a deal, they want to collect the taxes as if the transfer was done for at least a minimum value.