Useful information


on 19. September 2018

It was formerly a common practice in Spain to declare a property sales price at a much lower than its real price in order to save money on transfer tax. The tax is always a percentage on the price.

If Tax authorities believe that your purchase is undervalued, they may send you a notice that the price has been re-assessed by them, along with a bill for how much extra tax you owe in concept of Transfer Tax.

First recommendation it is that you always set in the deed the real price you are paying to buy the property. No matter if the seller or, the agent recommends you to set a lower price to “save” taxes.

Even though the price in the Deed is the real price you are paying to buy the property, the tax authorities may consider that the market value of that property is higher. Therefore, they may send you a claim to pay the tax according to the market value they consider.

This re-assignment of value is based on market researches. They cannot afford to send a proper valuator to each property in every transaction to find out individually, the market value.

The Court of Justice of the Valencian Community and the Supreme Court in Madrid ruled, once more, that the Tax authorities could no longer asses a different value than the one declared by the seller and purchaser in the deed, as long as they do not engage a valuator who examines the property on site. This ruling is based on the idea of that, the primary purpose of a valuation is to recognize the asset on what the valuation is based on, as it is extremely difficult to evaluate accurately the building and the maintenance conditions of property without a preliminary recognition on site.

Many purchasers simply pay when they receive the letter from the tax authorities, even though they never declared a lower value than the real price they paid for the property. The reason for it is that they ask to the one who assist them when they bought, usually a real estate agent whereas it is a lawyer or, a tax advisor, the professional who will give you the best advice on legal and tax issues.

You always have the opportunity to contest the value assessed by the Tax authorities with no consequences, other than you will not have to pay the extra tax. A lawyer, expert on these type of matters, should make the claim. Ask a lawyer when you receive any notice from the tax authorities. They may save you a lot of money. This is a good example that the professional advice worth much more than what it costs.