To kick off this section, a catch-22 tax situation that appears to be affecting buyers in some areas.
As you may know, the property market in Marbella has been in the doldrums for a number of years. As a result market prices are back where they were 3 or more years ago, even if official figures suggest that prices have been steadily rising, albeit at a lower rate than before. Official figures are notoriously unreliable, and everyone knows that they overstate prices. The scandal is that tax officials in Marbella appear to have started fining buyers for under-declaring (paying part of the price under the table in cash) even if they haven’t. If the tax office thinks that the declared price is too low, they fine the buyer. So if you do everything by the book, declare the full price, and pay all your taxes, you might still be fined. All that matters is the price the tax authorities believe you should have paid, which might well be above the price you actually pay. A classic catch-22: whatever you do, you can’t win. Heaven help you if you find a real bargain.
I’m sure I don’t have to stress how utterly absurd this is. Under-declaring is rife in Spain, and has probably been going on as far back as the reconquista. It is encouraged by high taxes on property transactions. Now they say they want to clamp down on real estate tax evasion, but rather than address the root cause, say by lowering taxes and reducing the incentive to under-declare, they start by fining law abiding buyers who are doing them a favour by buying in a difficult market (and adding to the long term tax base). Buyers have to prove they haven’t under-declared, which is impossible, and the tax authorities don’t have to prove anything. The lack of transparency in the market means they can get away with it.
By fining people who pay the true market price, they run the risk of underminging the market. If this problem grows, and large numbers of potential buyers become aware of it, then demand could fall, as who will buy if they get fined for doing so? If demand falls so will prices, meaning even bigger fines for buyers….
If the Spanish property market tanks the Spanish economy will be in real trouble. You would expect the authorities to do everything in their power to build confidence in the market. Instead they come up with this little scheme to drive buyers away. Madness.