Cadastral value higher than sales price

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This topic contains 22 replies, has 13 voices, and was last updated by Profile photo of Anonymous Anonymous 7 years, 1 month ago.

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  • #54821
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi,

    We are completing on a property in Marbella next week, and today our lawyer called to say that we would probably have to pay 2000 euro more than expected, because the cadastral value is higher than the sales price of the property! One would expect that in the current climate, the cadastral values would be more realistic?

    – Does this happen often?
    – Surely buyers must be able to dispute this?

    It isn’t even so much of a distressed sale, we offered 10% under asking price (because we really love the property), and since we are able to complete very quickly, the vendors agreed.

    Anyone with recent experience on such a matter?

  • #90773
    Profile photo of Anonymous
    Anonymous
    Participant

    An agreed purchase price is an agreed purchase price. It doesn’t have to bear any relation whatsoever to the catastral value. The seller may have difficulty persuading Hacienda that the sale price was lower than the catastral value but that is their problem, not yours.

  • #90781
    Profile photo of katy
    katy
    Spectator

    It is the buyers problem too. It happened to us, although many years ago. Approx. two months after purchase Hacienda came back to us, they would not accept the low purchase price (although we had declared fully). Appeal was rejected and we paid something like a few thousand.

  • #90786
    Profile photo of Anonymous
    Anonymous
    Participant

    In respect of transfer tax?

  • #90788
    Profile photo of flw
    flw
    Participant

    Katy is right, it’s happening all the time. In fact, it’s more a problem for the buyer than the seller. The seller pays CGT to the national government, and the buyer Transfer Tax to the regional government (Junta de Andalucia in Qwerty’s case). The former rarely requests further tax (and it’s the seller’s problem, as hillybilly correctly points out), but the Junta de Andalucía has been very active lately requesting more money (probably because they are broke), something which makes no sense in the current economic climate.

    I remember Mark commenting about this on his blog post Tax catch-22 (cannot seem to get it working)

    If you want to know the exact figure the taxman expects you to pay for the property you are buying, you can use this calculator. The valuation figures provided are those of 2008. For 2009 the figures change, and guess what? They’ve gone up! 😯 For Marbella, you will have to add around 7% on top of the valuation the calculator provides.

    There is nothing much you can do but to wait for the dreaded letter after you have completed. If it arrives, your lawyer should be able to successfully appeal this tax request without too many problems (no one believes any longer that property prices are rising!) It may be a good time to agree with your lawyer to include this as part of the conveyance service at no extra costs for you (except for, perhaps, a valuation report).

  • #90789
    Profile photo of Anonymous
    Anonymous
    Participant

    Thank you all for your very helpful replies. I guess we just have to complete and see what happens, just happy that we’ve been informed before completition, rather than getting a surprise afterwards.

    We will surely ask our lawyer to appeal this tax!

  • #91182
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi,

    it is true that the tax office are trying to get taxes paid on the basis of calculations made on the basis of statistics, etc which are not updated to market situation. They do this in order to cover the lack of tax revenues due to the decrease in the purchase operations. In fact, in some cases the personnel at the tax office are being paid a bonus if they send such letters.

    However, there is a legal relief against that: once you receive the letter from the tax office, then you can make allegations, and you can even fight those calculations through a valuation made by an independent surveyor. I have done it before and it can be achieved. Another thing is that the solicitor firm is not specialised in that area, or that they do not tell you on time that the letter has been received (as the period to submit a defence starts counting since the letter arrives).

    As to the cost of the defence, it depends: if the tax they are charging is over 1.000 €, then it is fine, as the valuation will cost surely round 350,oo and the legal fees round 200,00. If if is less, then it is up to you: either you pay and you avoid further headaches, or you fight.

    good luck!

    @Qwerty wrote:

    Hi,

    We are completing on a property in Marbella next week, and today our lawyer called to say that we would probably have to pay 2000 euro more than expected, because the cadastral value is higher than the sales price of the property! One would expect that in the current climate, the cadastral values would be more realistic?

    – Does this happen often?
    – Surely buyers must be able to dispute this?

    It isn’t even so much of a distressed sale, we offered 10% under asking price (because we really love the property), and since we are able to complete very quickly, the vendors agreed.

    Anyone with recent experience on such a matter?

  • #91718
    Profile photo of Anonymous
    Anonymous
    Participant

    I wanted to let other homeowners know of something that has happened to us and I believe many other homeowners.

    We bought our house in Murcia on the 13th July 2005. Like a lot of other people we thought we were legal however three years down the line we finally got confirmation that our house was illegal. Our builder has now paid the fines and we thought we could now settle down and think about retiring and moving permanently to Spain.

    Our solicitor got in touch with us last week to say he had received a letter from the Murcia Tax Office with a demand for an additional Tax payment of 4.500 euros. The Tax Office have decided that our house was undervalued at the time of purchase and they have decided what the value should have been. They have given us 10 days to respond. Our solicitor has told us he has come across a few other instances like ours recently and the reason being given is that because of the credit crunch Tax receipts are down and this is the Governments way of getting money in. It would seem this is only being targeted at foreign buyers not spanish buyers.

    Our solicitor is trying to negotiate the payment down or removed but has advised us to prepare to have to pay this tax bill. He has also advised if we do not pay the Government can embargo our property, This is outrageous that this allowed to happen

    If in the UK the Government decided that houses in their opinion were undervalued at the time of purchase and started to send out retrospective invoices for additonal stamp duty payments many years later there would be an uproar especially if payment was demanded immediately and threats made to embargo your properrty.

    This is yet another instance of the Spanish Property market needing to be properly regulated.

  • #91719
    Profile photo of Anonymous
    Anonymous
    Participant

    WHEN will Spain stop acting like Pirates ?! That is outrageous. 😈

  • #91722
    Profile photo of Inez
    Inez
    Participant

    It is being enforced to the Spanish as well. Hacienda dont want to accept the lower actual sales price and base themselves on the catastral value. This was ok in the good days, but the values were recently adjusted and are in many cases higher than the actual price paid.

    I have this issue with a property at the moment, catastral value is 250,000 euros, sales price 160,000. Market price is higher than catastral!

    We advised the spanish buyers they will have to pay the tax on the difference and they have accepted that.

  • #91724
    Profile photo of Anonymous
    Anonymous
    Participant

    Inez wrote:

    I have this issue with a property at the moment, catastral value is 250,000 euros, sales price 160,000. Market price is higher than catastral!

    Inez, does that mean the people are paying 160,000 for a property worth in excess of 250,000? 😕

  • #91725
    Profile photo of katy
    katy
    Spectator

    The spanish are still very much into the “black stuff” two robberies this week in Malaga. One spanish was robbed leaving a bank with 70,000 euro and a foreigner of 50,000 both were believed to be property deals 😯

    A friend selling in the campo was offered a deal from a spaniard…all black money!! Not sure what they expect people to do with it…maybe under the bed 😆

  • #91726
    Profile photo of Anonymous
    Anonymous
    Participant

    @katy wrote:

    A friend selling in the campo was offered a deal from a spaniard…all black money!! Not sure what they expect people to do with it…maybe under the bed 😆

    What does it mean “black money”? You mean cash offer?

    How much below the asking price was the cash offer?

  • #91727
    Profile photo of Anonymous
    Anonymous
    Participant

    We wrote an article on this matter last year based on real cases we’d had.

    Careful With the Tax Office When Selling or Buying at a Discounted Price

    Mark had mentioned it previously in an article he wrote back in 2007:


    Tax catch-22

  • #91729
    Profile photo of Inez
    Inez
    Participant

    Claire, depends on what you mean by property worth! The valuation is probably in the region of 280-320k based on size (167sqm 3 bed apartment) and the agreed price is 160,000. For information purposes, apartmently 2 bed apartments in the same development were trading at over 400k just 18 months to 2 years ago!

    I did actually get it on at 210k after haggling with owner, many viewers, no one placing money down. owner had enough so decided to take the highest bid I had. I have informed the buyers they will get hacienda knocking on their door next year but in view of the deal they are happy to pay the extra.

    Re cash/black, Flos, cash is not necesarily the same as black money. You can buy a proeprty cash – the transaction is obviously faster and takes just a matter of days. Black money is underdeclared money, and this can be cash (ready notes) or cheque! And sometimes approved by the banks as well.

    It is illegal, and if caught the sentencing can be very severe.

  • #91732
    Profile photo of katy
    katy
    Spectator

    I would not buy or sell if black money was involved. Recently there has been cases of people being paid with counterfeit bills or fraudulent bankers cheques. They do not have any re-dress. The spanish are still very much using this method though.

    One couple I know took a large sum of black money (despite their Lawyer advising against it) The same day as the sale they left for Gibraltar with the said sum. The bank in Gib would not accept the cash without a paper trail. They were flying back to the UK that evening. They returned to the seller and asked for a cheque instead…the cheque bounced 😯 Last I heard they were still trying to get the money off the buyer.

    Re. the high valuations. It seems that the newer the property the more likely hacienda will come back to you. My property is old and I worked mine out from the IBI and it comes out much lower than I expected.

  • #91734
    Profile photo of Anonymous
    Anonymous
    Participant

    That’s what I thought Inez. Even if they have to pay extra Tax, still a bargain it seems! Thanks for explaining.

  • #91738
    Profile photo of Anonymous
    Anonymous
    Participant

    Does anyone know if it is possible to take out some kind of indemnity insurance when purchasing a property, to cover the possibility of being stung for the extra tax?

  • #91739
    Profile photo of katy
    katy
    Spectator

    According to this article they are planning to take account of the recent falls.

    http://www.diariosur.es/20090423/marbella/gobierno-estudiara-bajada-valor-20090423.html

    Snowy I am sure someone will be able to provide insurance here on the costa…wether they will pay out is another story.

  • #91778
    Profile photo of Anonymous
    Anonymous
    Participant
    Claire wrote:
    WHEN will Spain stop acting like Pirates ?! That is outrageous. 😈

    When will the Spanish ever learn?, one fiddle after another. The government is bankcrupt, the autonomous governments are bankcrupt and the Town Halls are bankcrupt , so they are all looking for new ways to raise money. The other problem is that in Spain new laws replace old ones, a buyer can buy a property for example in let us say the year 2005 and under the law is 100% within the law, a new law is introduced in 2009 making their position illegal, so who has to pay? Right the purchaser. I am surprised that more Town Halls are not using laws whereby they can introduce special taxes, I cannot remember the name of the law it is something like ,Contribuciones especiales ………

    I see unemployment in Spain hit 4.010,000 in March and could reach 5m by the end of the year, but we do not have to worry the new economics minister has said the figure will soon get better, perhaps she is related to Mr Darling as she is in cloud cuckoo land as he is.

  • #94882
    Profile photo of Anonymous
    Anonymous
    Participant

    @helenjinks wrote:

    I wanted to let other homeowners know of something that has happened to us and I believe many other homeowners.

    We bought our house in Murcia on the 13th July 2005. Like a lot of other people we thought we were legal however three years down the line we finally got confirmation that our house was illegal. Our builder has now paid the fines and we thought we could now settle down and think about retiring and moving permanently to Spain.

    Our solicitor got in touch with us last week to say he had received a letter from the Murcia Tax Office with a demand for an additional Tax payment of 4.500 euros. The Tax Office have decided that our house was undervalued at the time of purchase and they have decided what the value should have been. They have given us 10 days to respond. Our solicitor has told us he has come across a few other instances like ours recently and the reason being given is that because of the credit crunch Tax receipts are down and this is the Governments way of getting money in. It would seem this is only being targeted at foreign buyers not spanish buyers.

    Our solicitor is trying to negotiate the payment down or removed but has advised us to prepare to have to pay this tax bill. He has also advised if we do not pay the Government can embargo our property, This is outrageous that this allowed to happen

    If in the UK the Government decided that houses in their opinion were undervalued at the time of purchase and started to send out retrospective invoices for additonal stamp duty payments many years later there would be an uproar especially if payment was demanded immediately and threats made to embargo your properrty.

    This is yet another instance of the Spanish Property market needing to be properly regulated.

    Fianlly got another response from the tax office today after our appeal. The tax office want 3089.80 euros by the 5th December 2009. If we can’t pay they may allow installments but will charge interest. It has taken 7 months for this descion and the have given us 6 weeks to pay. I still have not heard of many other people with this issue with the exception of posts on this forum

  • #94885
    Profile photo of Anonymous
    Anonymous
    Participant

    Helen,

    Was this an off-plan or re-sale property?

    Edit:

    There is a “small” silver lining here. That is I assume they are re-valuing your property by approx 43000 Euros (and 7% of this is 3000)

    When you come to sell and move back to the UK your gain will be 43000 Euros less and hence a GCT bill 7700 Euros smaller that it would have been (18% of 43000)

    I appreciate that this is dependent on other factors such as the making of a profit on sale, not your primary residence etc.

  • #94902
    Profile photo of Anonymous
    Anonymous
    Participant
    Claire wrote:
    WHEN will Spain stop acting like Pirates ?! That is outrageous. 😈

    I am afraid this is how it is in Spain, a new law can act retrospectively. A person can be legal in say the year 2005, the Cobbler or whoever can bring in a new law and Mr I.B. Daft can then find that what what was legal in 2005 is/was illegal.

    Also with most town halls bust they are looking for new ways to, rob us sorry I of course meant, to say, raise money.

    It is “outrageous ” but that is how it is.

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