Transfer tax in Spain and how to defend yourself against local tax authority claims

WHAT IS THE TRANSFER TAX?

The tax to be paid by you as a property buyer in Spain is called the Transfer Tax. The rate varies from region to region.
The taxable amount on which this rate is applied is known as the Tax Value of the property.

Álava 2,5%-4%
Andalucía 8%-9%-10%
Aragón 7%-8%-9%
Asturias 8%-9%-10%
Baleares 8%-9%-10%-11%
Bizkaia 2,5%-6%
Canarias 6,5%
Cantabria 5%-8% or 10%
Castilla-La Mancha
6%-9%
Castilla- León 4%-10%
Cataluña 5%-10%
Comunidad Valenciana 7%
Extremadura 4%-8%-10% or 11%
Galicia 10%
Guipúzcoa 2,5%-4%
La Rioja 5%-7%
Madrid 4% -6%
Murcia 8%
Navarra 5%-6%

It is calculated by multiplying the cadastral value of the property by a local index, which is officially published on a yearly basis for each municipality.

For example, here is the value calculator for Andalusia.

Taxes

DIFFERENCES IN TAX VALUES

It is normally during the calculation of the tax value of your property that discrepancies can arise. Namely, where the local administration has a different financial valuation to yours. This can lead to a claim against you after the purchase of your property in Spain.

The Transfer Tax Act establishes that the taxable amount needs to be the true value of the transmitted asset. But, what is the true value of a property and how is it calculated?

 

CALCULATING THE VALUE OF A PROPERTY

In Spain, there are three possible ways to calculate the value of a property.

  • The Cadastre value, which is determined by the local market.
  • The market value, or reference value, which by law, can never be higher than cadastral value.
  • The true value or tax value: which is required for tax purposes.

The true value is essentially the purchase price of a property – what is effectively paid for a property on purchase.

It needs to be within market ‘averages,’ i.e. the price per square metre of the property should be comparable to those being paid in the area for properties with similar characteristics. This value is determined by local supply and demand.

 

WHAT CAN I DO IF THE TAX AUTHORITY CLAIM A DIFFERENT VALUE TO WHAT I PAID?

Firstly, you need to assess your situation with a lawyer and decide whether a claim is advisable. You can either:

  1. Pay the full amount the Tax Office says, with any corresponding interests.

Or –

  1. You can make a claim or appeal against the Tax Office decision. With the main argument being, that the values set up by the administration are not adapted to reality.

 

WHAT TO DO IF AN APPEAL IS CHOSEN?

The appeal needs to be made within an established deadline and with relevant arguments that vary from region to region.

In order to avoid the payment that the administration claims, it is necessary to contest the tax valuation made by the Administration using the appraisal of an expert.

For additional information see

https://blog.costaluzlawyers.es/services/property-services/related-taxes/

https://blog.costaluzlawyers.es/blog/illegal-charges-by-tax-administration-office/

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