Re: Re: The Problems Caused By Under-Declaration

#115573

zenkarma
Participant

@katy wrote:

You are wrong. hacienda has a price for a property and they won’t budge. You can sell at 200,000 but if the authorities say it is worth 240,000 then they will come back to the buyer for the 8% of the assumed figure. Likewise the seller for CGT.

No, you are wrong.

You’re getting utterly confused by all the various terms and taxes that have to be paid when a property is sold – because you clearly don’t understand any of them. Incredible for someone posting on a forum about Spanish property!

In my post I referred specifically to capital gains tax, because that is the only tax that could or would be affected by under-stating a property purchase price by paying part of it in cash when the property is resold, and it has no effect whatsoever when the property has decreased in value. For the simple reason, you only pay capital gains tax on the profits made by the difference of purchase price and resale price. If no profit has been made, you are not liable to capital gains tax. End of.

What you’re now referring to here, which is completely separate and entirely different to capital gains tax, is the plusvalia property tax. This is based on the valor catastral, which is a value assigned to the land the property is located on by the municipal province the property is located in. The valor catastral is an assessment of the value of the land and has nothing whatsoever to do with the price of the property that happens to sit on the land either in terms of purchase price, resale price, market price or what anyone might think it’s worth. Plusvalia is paid to the municipal province, capital gains is paid to the hacienda. Valor catastral is assessed and set by by the municipal province and it is not a reflection of the value of the current market price of the property.

The valor catastral is the virtual equivalent of the old rateable value of a house in the UK and is used as a basis for calculating the local IBI Provincial tax and municipal rubbish collection fees.

The plusvalia is a provincial tax collected and paid to the Province the land is located in and has nothing to do with hacienda. This tax assumes a notional increase in the value of the land the property sits on and is calculated on the current valor catastral and number of years the property has been held. Hence the assumed increase in land value over the years the property has been held in ownership.

As you can see (hopefully, but I won’t hold my breath) the purchase price paid for a property and registered at the notary and sale price paid for a property and registered at the notary have nothing whatsoever to do with the local provincial plusvalia tax or the valor catastral.

Yet I’m the one here with a half a brain right? 🙄