Beating the Spanish tax man … or not?

LAST UPDATED: 12 Jul, 2011 @ 09:06
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Beating the Spanish tax man … or not?

Catastral values and tax

It used to be standard practice when buying and selling property in Spain to under-declare the value in the escritura, or deed, in order to avoid tax. Everybody was complicit, vendor and purchaser obviously, but also estate agents, lawyers and even notaries turned a blind eye. In recent years the authorities have tried to tighten up, however. Paul Whitelock, who has transacted a few houses in Spain in his time, has had a look at the current situation.

The practice of under-declaring a property’s value to avoid taxes has to some extent disappeared in Spain. Once upon a time everybody was at it and it seemed to be condoned. All part of the long-accepted tradition of low-level corruption here.

In the last few years things have tightened up. Most estate agents and lawyers are no longer prepared to get involved, as fines can be heavy.

Every property has a valor catastral, a value for tax purposes. This may have nothing whatsoever to do with the real value, as valuations in many areas are well out of date, and certainly this value does not relate to market value.

To counteract the fact that valuations are out of date each town and village has a coefficient by which the valor catastral is multiplied, in order to arrive at a more accurate valuation for tax purposes. Hacienda use this to try and prevent loss of revenue through under-declaring the price when properties change hands.

So, for example, we have an apartment in Ronda (Málaga) with a valor catastral of just over 17,300€. The coefficient for Ronda is a massive 4.2 because property values have not been re-assessed since 1998. That makes the valuation of my apartment for tax purposes 72,660€. The market value is, however, much higher, at around double that figure. So the system is by no means perfect, because if we were to sell we could under-declare massively and presumably get away with it! Not that we would, of course! … Anyway, we’re not selling.

In nearby Montejaque the situation is very different. Here the coefficient is just 1.8 because properties were re-valued as recently as 2007. A friend of ours owns a house there with a valor catastral of nearly 92,800€ which makes its value for tax purposes 167,040€. It’s market value is around 180,000€, so that’s a little more accurate than the Ronda example.

So, be warned. If the authorities think you’ve under-declared to avoid paying tax, you could be in for a shock. You could be hit by a big tax bill for the shortfall and a fine to boot.

11 COMMENTS

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  1. Dont get me started on Spanish tax, down south where i seem to have ended up is just a free for all when it comes to paying or declaring tax. Spain has huge problems at the moment but if they got control of 50% of the unpaid tax in Andalucia it would fill a very large part of the black hole Spain finds itself in at the moment. The thing is, it’s not like it’s not easy to spot as everyone is doing and very openly with what appears to be, not a care or a worry about being caught.

  2. I think you scaremongering a little here. Seeing as almost all homes are sold for less than hacienda vale, the buyer just opposes valor catastral with details of purchase and that’s that.

    I doubt you can find any cases of anyone having to pay additional tax assuming their purchase was correctly administered.

  3. It would be great if there was a one stop shop that could impartially advise about all these tax issues in Spain.

    Everyone you talk to has a different opinion and Im talking about so cdalled tax experts who ply their trade down in Costa del Sol

  4. J Shipley, if only it were that easy and true. Friends of ours bought last October in Casares and the Hacienda told them that they have under declared by 40%. They are fighting the payment demand in court.

    Neigbours on the urbinisation also had this and had to pay.

    We are buying in a similar situation from a bank reposesion and the gestor has already told us that we will have to pay the tax on the valor catastral not the purchase value.

  5. I would love to know what the valor catastral is of my property in Montejaque., after waiting for 4 years I have finally seen a payment go out to the patronata and have no idea until I go again for a holiday whether the payment taken will be on going as 9 , 3 or 1. I tried looking on their website but as I dont know the reference no. I can’t find out. There seems to be no scan agaist the payment in the unicaja account that I can look at the bill.

  6. It can’t be legal for the hacienda to charge their own tax on a property sale. I would take it all the way to the EU if you feel mistreated. Nothing to loose, everything to win. But unfortunately people are lazy and would rather cough up than fight. Am I right?

  7. I have been once cheated by the conveyancy agent by not telling me everything about the underdeclaring and I got a fine.. I did not mean to underdeclar, but the market price for my appartment which I bought was less than the catastral value and I knew nothing about it all. She did not tell me that I should declar at the Tax office that I paid less than the Tax value so I would have paid the difference in the Tax and everything would be correct. So what I had to pay was the difference in the value Tax and 50% of the amount paid a fine.. Who to blem and who have to be punished? I need your advice on. Also I need information on how to compalain in the EU.???

    I need another advice…. I am going to buy a fince for 95000 € in Cartama and the Catastral Value is 60000 € …. Do I need to do anything this time to avoid any extra payment and a big fine????

    P.n…. This time, I am going to do the conveyncy by myself? What do you think?

  8. Linda, it just happened to a friend of mine in Fuengirola. He has to pay 30.000 euros because of the same “underdeclaring” issue, even after he used the services of a lawyer and a financial advisor and neither mentione such an issue. It hit him three months after he completed the purchase. Currently all of his accounts are embargoed. Get a good lawyer is my advice. Not worth complaining, as noones listening. This is Spain.

  9. Can some one please tell me how to find out the Valor Catastral value of the property before I buy the property?

    Where can this information be found? And how can it be obtained.

    This way, hopefully I can know in advance how much the total cost will be upfront, without getting into problems later.

    No one seems to be able to give me this information.

    Any help in the right direction would be very much appreciated.

    • look at yout IBI bill its the top number…. they calculate off of this amount. then wel being spain, they can change the mind any time, change toe rules for teh hel of it and then invent another tax. if you dont pay the new invented tax they will charge interest adn fine you. Yo have to remember we are brits. we are all millionaires and it is our personell respnsibilty to gt spain out of it european debt

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