LAW of Property in Spain

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This topic contains 8 replies, has 8 voices, and was last updated by Profile photo of Anonymous Anonymous 5 years, 9 months ago.

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  • #56122
    Profile photo of Anonymous
    Anonymous
    Participant

    What is the PRICE of a property transaction that the authorities would decide was the REAL PRICE. Is it the price extracted from the purchaser by the estate agent ? Or is it the price received by the vendor ? Some of us know that some estate agents in Spain and the Canaries are bent and lawyers cannot be relied upon. In particular if the agent once securing a price from a vendor then tells his client the vendor he can only get 10.000 less -the desperate vendor accepts it and goes to the notary and signs whilst the vendor has been told that it is normal to pay some money in cash -all the money will be paid to the vendor but it ends up in the agents and lawyers back pocket -the vendor finding out later that in the small print of his reservation contract it says if the agent secures a higher price he can keep the extra as commission. This is a disgusting practice that agents and lawyers thrive on. However if one wishes to shop estate agent and lawyer one needs to be on safe ground What really was the price ?

  • #102975
    Profile photo of Inez
    Inez
    Participant

    The price stated on the Escritura is the declared price of the sale of the property. If there was a cash deal as well, or an agents commission taken as cash it is undeclared and does not appear.

    This is why true property prices are so false here in Spain, with so much undeclared cash in the past – not so much now – and bear in mind the banks were happy to go along with this too – its hard to truly ‘value’ a property, and therefore hard to know what ‘discount’ or bargain one is actually getting!

  • #102976
    Profile photo of Inez
    Inez
    Participant

    I must add things are very different now and a purchase contract has to be shown to the Notary and is indeed in cases added to the escritura alongside copies of the cheques received by all parties. Banks now only lend on the value of the purchase contract or valuation whichever is the lower, but this really came into force only a couple of years ago!

  • #102977
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi Ptr,

    Just one word of caution: Before buying, make sure you know the property’s fiscal value.

    When buying your property, the “price” (for your transfer tax liability) will be either the fiscal value of the property OR the purchase price – WHICHEVER IS THE GREATER. The fiscal value is a multiple of the property’s rateable value and can be FAR in excess of the genuine purchase price. It’s my understanding that the current multiplier for Marbella is 4.5!

    eg. You’ve agreed to buy a ‘distressed sale’ villa in Marbella for 500,000e

    Genuine Purchase Price of villa 500,000e
    Rateable value of the villa 200,000e
    Fiscal Value of the villa 900,000e (200,000e x 4.5)

    In this example, if you CAN’T prove that the rateable value is excessive compared with other similar villas in the area, you will have to pay the purchase tax based on the villa’s fiscal value and NOT the purchase price. With transfer tax currently at 8% (for purchases in excess of 400,000e), this means that you’d be paying 8% on the 900,000e and NOT the 500,000e purchase price – in other words, you’d have to find a FURTHER 32,000e to pay your tax bill. Daylight robbery!!!

    In the above example, even if you get independent valuations at the time of your purchase to prove that your purchase price was genuine, it SEEMS that this is no guarantee you’d see any of that 32k again. This is really putting me off buying right now. I don’t know any way of getting around this problem, other than factoring in this extra tax bill in any offer you make on a property.

    Purchasers today are basically being viewed as inherently dishonest by the tax authorities because of the under-declarations of the past, and being punished accordingly.

  • #102980
    Profile photo of katy
    katy
    Spectator

    Snowy you are correct. Haciendas official values are much higher than the price actually sold right now. The tax also affects the seller too they come back to them for extra capital gains.

    Black money, would never do it no matter how many times you hear “that’s the way it is done here”…tell them to bugger off! You may save on the 8% but pay much more on 18% capital gains when you come to sell or in inheritance tax. Any reputable Lawyer will now advise you not to do it. I would not involve an estate agent in a sale, once an offer is accepted it is not their role.

  • #102981
    Profile photo of Anonymous
    Anonymous
    Participant

    @Snowy wrote:

    Hi Ptr,

    Just one word of caution: Before buying, make sure you know the property’s fiscal value.

    When buying your property, the “price” (for your transfer tax liability) will be either the fiscal value of the property OR the purchase price – WHICHEVER IS THE GREATER. The fiscal value is a multiple of the property’s rateable value and can be FAR in excess of the genuine purchase price. It’s my understanding that the current multiplier for Marbella is 4.5!

    eg. You’ve agreed to buy a ‘distressed sale’ villa in Marbella for 500,000e

    Genuine Purchase Price of villa 500,000e
    Rateable value of the villa 200,000e
    Fiscal Value of the villa 900,000e (200,000e x 4.5)

    In this example, if you CAN’T prove that the rateable value is excessive compared with other similar villas in the area, you will have to pay the purchase tax based on the villa’s fiscal value and NOT the purchase price. With transfer tax currently at 8% (for purchases in excess of 400,000e), this means that you’d be paying 8% on the 900,000e and NOT the 500,000e purchase price – in other words, you’d have to find a FURTHER 32,000e to pay your tax bill. Daylight robbery!!!

    In the above example, even if you get independent valuations at the time of your purchase to prove that your purchase price was genuine, it SEEMS that this is no guarantee you’d see any of that 32k again. This is really putting me off buying right now. I don’t know any way of getting around this problem, other than factoring in this extra tax bill in any offer you make on a property.

    Purchasers today are basically being viewed as inherently dishonest by the tax authorities because of the under-declarations of the past, and being punished accordingly.

    I cannot believe that something like this could not be taken to a european court. It is ludicrous and I am sure Spain can not get away with doing things like this long term. I don’t believe that they are that behind with the law that these things can be enforced.

  • #102982
    Profile photo of Anonymous
    Anonymous
    Participant

    @jonas wrote:

    I cannot believe that something like this could not be taken to a european court. It is ludicrous and I am sure Spain can not get away with doing things like this long term. I don’t believe that they are that behind with the law that these things can be enforced.

    Why not.

    The UK tax authorities are no different.

    http://business.timesonline.co.uk/tol/business/law/article5026460.ece

    The argument in the case above basically been that he had strong ties with the the UK even though he spent less that 90 days a year in the UK.

    If you sell your property to a son/daughter with the intention of avoiding a forced sale to pay for care home fees, HMRC can claim that the sale price is below market value and hence make you ineligible for local funded old age care. They already have a seven year rule for assets given as gifts being caught under inheritance tax rules.

    HMRC charge tax on deemed tips that self employed hairdresser may receive (or used to).

    I would say all tax authorities are the same!

  • #102987
    Profile photo of Anonymous
    Anonymous
    Participant

    @jp1 wrote:

    @jonas wrote:

    If you sell your property to a son/daughter with the intention of avoiding a forced sale to pay for care home fees, HMRC can claim that the sale price is below market value and hence make you ineligible for local funded old age care. They already have a seven year rule for assets given as gifts being caught under inheritance tax rules.

    Regardless of who you sell it too the forms for declarations only ask ” Do you own a property ” & ” Have you sold a property in the last six months .” 😆 Makes you wonder who employs the form writers !

  • #102988
    Profile photo of Anonymous
    Anonymous
    Participant

    It is a well established fact that when it comes to Tax. The tax payer is guilty & he or she has to prove their innocense. THis means that the burden of innocense is shifted to the Taxpayer. The difference is in UK there is a due process.

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