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Case Study 2: Dispute over value of the property in Spain

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This series of case studies looks at legal problems Andalusian Lawyers discovered when representing buyers of properties in Spain. A solution to these problems was found before our clients had signed any documents or paid any money committing them to a purchase. If the problem had been impossible to resolve, Andalusian Lawyers would have advised the clients not to proceed with the purchase and look for an alternative property.

In the second of our case studies, we look at how we saved our clients a big extra tax bill when they bought a property whose purchase price was much lower than the official fiscal value.

All purchases of Spanish property are subject to transfer tax (levied at between 8 and 10 per cent in Andalusia enlace al post sobre impuestos de compra 14.1.14) and this is calculated based on the price paid for the property or its fiscal value. In normal market circumstances, these are broadly similar. However, since the drop in the Spanish property market in 2008, the fiscal value of properties is often considerably higher than the actual price paid. In many cases, the regional government has applied the higher rate and made an official claim for the difference from the buyers, resulting in extra tax payments and possibly a fine.

The Problem: Our clients were interested in buying a villa in Mijas Costa and their offer of €480,000 had been accepted by the seller. The fiscal value set by the Andalusian regional government was considerably higher – €572,000, an increase of €92,000, which would make a huge difference on the amount of transfer tax our clients would have to pay.

The Solution: We warned our clients of this potential problem in our first meeting to discuss the purchase. We outlined a number of ways of tackling this problem so our clients could make an informed decision on whether to proceed with the purchase. We advised that the best solution would be to prove that the price paid and declared in the title deeds was the correct value of the house in today’s market. We would then present this to the regional government as proof of the property’s true value if they made a claim for extra tax.

We commissioned a valuation survey from an independent professional who valued the property at €510,000. This value was higher than the actual price paid but considerably lower than the fiscal value set by the regional government.

Our clients decided to proceed with the purchase and paid transfer tax on the purchase price for the property. Sometime later, they received notification from the regional tax office claiming extra transfer tax on the fiscal value of the property. Using the valuation, our fiscal advisor disputed this claim and proved that the property was not worth the fiscal value. This proof was accepted and as a result, our clients paid transfer tax on the difference between the actual price and the valuation, a huge saving on the tax bill claimed by the regional government.

The situation described in this case study is real and commonplace in Andalusia. Andalusian Lawyers advises you always hire the services of an independent lawyer before signing any document or paying any money that commits you to a purchase. Only with expert legal advice from a registered lawyer will you protect your investment.

Contact us for more information.

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