Antonio Flores
Antonio Flores

A FORTNIGHT ago I was attending the Talk Radio Europe legal clinic when a listener, who happened to be Myra Azzopardi from the Citizens Advice Bureau Spain, mentioned a widely unknown tax that nobody ever pays: transfer tax on rental property.

While only a minority of lawyers asked will admit to knowing it, or even having heard of it, the majority of the population is oblivious to its existence.

Older people do recall that, once upon a time, landlords would buy tenancy template contracts from any tobacconist (below), where the applicable transfer tax was inserted.

This has gone out of fashion in a big way and nobody bothers.

In Madrid, the regional tax office has started a massive campaign to remind tenants of their obligation to pay this tax, following technical upgrades to their IT systems that enables them to cross-reference data.

The revenue received in 2015 was still minute: around €600,000 for the year.

In Andalucia, I am yet to find a tenant who has ever paid it, even if the tax is negligible in  comparison to other forms of revenue.

For instance, a five-year contract where the tenant pays €850 month will attract €204 for the full contract duration, and a further €40.80 for every year it gets extended.

The law also states that owners can be made responsible for payment of this tax if the tenant fails to do so.

Article Nine of the applicable law confirms this: “In tenancy agreements, owners will be held liable if he/she has collected the first rental without demanding proof of payment of tax.”

Bizarrely, the law gives the tenant 30 days to submit the tax declaration from exchanging contracts, which we do know always coincides with the first rental payment.

With such conflicting rules, no wonder no one can be bothered.

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