“COMPLEMENTARIALETTERS” from the Spanish tax office when you bought a bargain property (cheap price)

In the last few years, we have been seeing clients who received letters from the regional tax office were they’d been asked for additional tax due on the purchase of their properties. The concept is easy to explain: under Spanish law, the tax office has got the capacity to override the declared values of transactions in order to ask for additional tax on the basis that the declared price was “under the market value”.

These letters are currently called “complementarias”.

We will explain you this matter following an example.

Imaging that you have a resale property in process of acquisition for a price for 345.000 EUR, at the Valencian Region.

Value of this transaction is 345.000 EUR

This price is called REAL-COMMERCIAL VALUE and is the value used to calculate the taxes derived from the purchase and the ones for the sale.

In case of resales, the tax to apply is the  the purchase tax (Transfer Tax – ITP),  which, in Valencia is  10% of the price.

However, although the value of the purchase is 345.000 EUR (REAL VALUE), the Spanish administration has up to 4-5 years to inspect and to reconsider the price used as base of the tax and being paid to this property (the REAL VALUE). So, during this period of 5 years the administration may inspect the transaction and may consider in their criteria that the value to be used to calculate the tax on this sale,  instead of the price paid (REAL VALUE), being  345.000 EUR must be higher, for example, 400.000 EUR. This last value is what we call FISCAL VALUE (“Valor Fiscal“).

If this will be the case, the Spanish administration might require you to pay the difference in both values, the REAL VALUE (345.000 EUR.) and the FISCAL VALUE (the one calculated by the administration: 400.000EUR). So, then, the administration may require you to pay the 10 % taxe with respect to 400.000EUR, rather than 345.000 EUR.

And the way to calculate the tax to pay will be on the exceeded amount when using the Fiscal Value. Using this example:

  • The 10 % from the Real-Commercial value is 34.500 EUR
  • The 10 % from the Fiscal Value is 40.000

40.000  – 34.500 = 5.500 EUR to be paid as for the excess

 Is there any way to detect the Fiscal Value on a property transaction?

Yes, there is, at the official site from Catastro but you need to have an official digital Certificate in Spain. Usually, your lawyer must do it when the purchase process is open.

However, even obtaining that Value from the official Catastro site, during 4-5 years the Spanish administration may investigate and contest the Real-Commercial price agreed with the buyer-seller. So, in order  to guaranty you from any ispections on this wat,  it would be recommendable to have a property VALUATION made by a specialist –ARCHITECT – on the date of purchase. This VALUATION will help to demonstrate to the Spanish administration the REAL VALUE of the property, and you would have more arguments to make opposition to future eventual inspections of these values in the future.