Complimentary tax on purchased property

The number of different taxes in Spain can be confusing, particularly where they are issued retrospectively. For example, there has been a lot of coverage in the expat press and online forums about a tax that is issued up to four years after you have purchased a property.

This tax, let’s call it the complimentary tax in Spain (the full title is thirteen words long in Spanish!) originated because many years ago in the hay day of property build and purchase in Spain it became common practice to declare a lower sale price than was actually agreed. This meant that both vendor and buyer had less capital gains and Spanish transfer tax to pay at a time when house prices were increasing rapidly. A mutually agreeable arrangement for them to the detriment of the tax man.

The Spanish tax man fought back with the Spanish complimentary tax. A demand for this additional transfer tax in Spain can be issued anything up to four years after the property has been purchased. It is the difference between the amount of transfer tax paid on the purchase of the property according to the value declared by the purchaser and what the tax man believes the true value to be.  The official value is calculated by the floor size and a formula is applied that varies according to where the property is located and when the formula has been revised.   

So, for example:

Declared value of property at time of sale	Transfer tax already paid	Actual value of the property according to the tax man	Transfer tax on full value	Amount owed (complimentary tax)
150,000€	10,500€	200,000€	14,000€	3,500€

 

Our advice is that If you are buying a property at a substantially reduced cost then you ask your solicitor to find out what the complimentary tax will be and set this amount aside for payment later. Just as you would any other tax.

However, you do have another option if you find yourself faced with a large complimentary bill. You can actually appeal and Ábaco have been successful in contesting cases where complimentary tax has been levied. You only have a month in which you can do this, so need to take action fast if a letter arrives.

This tax can be prepared for and needn’t come as a surprise.  If you are considering buying a property at a vastly reduced price then don’t be dissuaded. You might have to put a little more money aside but you will still have bought a bargain.