Many people who buy homes in Spain are unaware of an additional tax that can be demanded at any moment up to five years following a house purchase. Owing to the current financial crisis, more and more people are in receipt of this unexpected tax bill.

 

The complimentary tax is in fact applied when the amount paid for a property appears to be considerably lower than the tax authority’s own valuation. When the property boom in Spain was in full swing, many purchasers and vendors agreed that part of the purchase price would be paid “unofficially”, and the sales price declared was therefore lower than the amount actually paid for a property. The advantage was that both purchaser and vendor would avoid higher capital gains tax and transfer tax.

Now the Hacienda, or Spanish tax authority, is checking the amount declared as a sales price against their own valuation and, if necessary, levying a complimentary tax comprising the difference between the two prices. With the current state of the Spanish property market in some areas, unfortunately this means that some people are genuinely selling their property at a price below the Hacienda’s valuation.

Those buying cheap property are advised to put up to seven per cent of the price aside for five years, just in case they are required to pay this tax, but this shouldn’t put people off buying in Spain and taking advantage of the low prices to be found for good properties.

For details of property for sale in Spain, visit the Spanish listings on Rightmove Overseas. One way to save money when buying in Spain is to use a currency specialist when transferring your pounds into euros to complete the purchase of your property. For more information on this, contact Smart Currency Exchange.

To understand the full step-by-step process to buying a property in Spain, collect The Overseas Guides Company’s ‘Spain Property Buying Guide’