Property purchase tax in Spain and the Valencia Region imputed values!
A client of mine has purchased a property in the Valencia Region and has recently made an enquiry that it is worth sharing it with all of you.
There are many properties in the Spanish market which are a real bargain. Obviously, as always, you have to look hard to find them. During all these years I have met several clients who have really managed to find good bargains as this client I am talking about on this article. He just bought a beautiful house overlooking the sea near Javea. The vendor was a nice lady who just happened to lose her husband and she did not want to keep living in Spain without him (which I completely understand!) She understood that in order to get rid of her house quickly she had to reduce significantly the selling price. In two weeks her dream house in Javea was sold to my client. My client was lucky enough to be in the correct place at the correct time.
Before purchasing the property, I expressly explained to him that the Tax Office (Oficina Liquidadora) was going to review the selling price (as it was so low!) and he might have to pay extra tax. My client had to be informed of all the potential amounts to be paid after purchasing his “home”. Finding that you have to pay an additional purchase tax on a property is extremely unwelcome, especially if you are on a tight budget.
The Tax Office (Oficina Liquidadora) has a right to review the declared selling price. Each property has a value imputed by the Tax Office. If the selling price declared is lower than this value, your purchase is going to be reviewed.
Most properties on the market tend to be over the imputed value and therefore not subject to further purchase tax. But if you buy a bargain, this is the tax consequence of it!
My client when he was aware that the Tax Office was going to review the selling price he asked me if the imputed value was going to be the one which the Tax Office was going to check to find out if he has made a gain when selling the property or not.
My answer was: NO!
The imputed value is only used to calculate the Property Transfer Tax to pay.
If you paid for your property 100.0000 € and then the imputed value is 150.000 €, when you sell the gain is going to be calculated according to the 100.000€ and not the 150.000€.