HomeComplementary Tax in Spain

Have you bought a Spanish property in the last 5 years?

You paid transfer tax when you bought your property. Now you might be liable to pay more.

What is complementary tax?

When you buy a resale property in Spain you must pay transfer tax (ITP). This is currently at 7% of the purchase price.

Even though you have paid transfer tax you can be contacted by the Tax Authority up to five years later to pay more.

This is called complementary tax and is 7% of the difference between the declared purchase value and what the tax office calculate the property’s real value to be.

Why did complementary tax arise?

During the property boom in Spain purchasers and sellers sometimes came to an agreement to pay some of the purchase price ‘unofficially’.

The amount declared on the deed was below what had actually been paid. By doing this, purchaser and seller could avoid higher capital gains tax and Spanish transfer tax payments.

As a result the Tax Authority began to check the amount the property had been sold at against their own valuation.

Complementary tax represents the difference between what tax they consider should have been paid and what actually was.

The drop in the market value of most property sold today has meant that many people are, genuinely, selling their property below what it might be valued at. This makes the purchaser vulnerable to complementary tax.

How much might it be?

This is one example of an actual demand that Ábaco are currently dealing with:

Purchased property price  74,500€ (7% tax paid: 5,215€)
Tax Authority valuation 116,403€ (7% tax calculated: 8,148€)
  -41,903€ (7% tax outstanding : 2,933€)

In this case, the new owner will have already paid 5,215€ in transfer tax when they bought the property.

The difference in the actual price paid and the valuation by the Tax Authority means that an additional 2,933€ has to be paid as complementary tax.

Total tax demand with interest = 3,253€

The complementary tax letter

This is an example of the notification delivered by registered post when complementary tax is due. It explains that your property value has been checked and that you owe additional tax.

Our advice

Appealing against the complementary tax is a good alternative but you will need to have received the letter in the first place. You should make sure that you have arrangements in place that enable you to either:

It is crucial that you receive the letter in good time as you only have a one month window in which to appeal. After that time has elapsed you will have no alternative but to pay the tax. Once you have received notification you should inform us immediately if you wish to appeal.

What you should do if...

Ábaco have had a very high success rate when appealing
against complementary tax.

Testimonials

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    Robert and Mary Margaret Field

  • “As Abaco Asesores’ very first clients we can vouch that during our ten year history with the company we have found them to be highly professional as well as being warm, friendly and approachable.”

    Bill and Jean Hutcheon

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Spanish Taxes On-line

 

Spanish Taxes On-line Video - ÁbacoTaxes