There is a serious issue which has come to light to the owner of this website that all purchasers and sellers of Spanish Property should be made aware off. The Foreign Office in the UK has updated its information on its website to make UK sellers and purchasers of property in Spain aware of the problems that you will now read about. The owner sold a property in Spain in August 2002 for 400,000 Euros approximately . He sold the property very close to this price which was based on a paid valuation from a RICS qualified surveyor acting on behalf of a UK bank and two valuations from the two largest estate agents on the Costa del Sol. The owner eventually sold the house privately avoiding estate agents fees which is not considered value.
Three years later the seller still had not received his retention back from the tax office.This normally should take 6 months at the most. The lawyers kept saying the tax office was looking into it ( for three years!!!) In applying to get approximately 20,000 Euros back the tax office instead sent someone ( an architect would you believe) to value the property as it stands in 2004.( paying no attention to works which may have been carried out in the intervening time to the property by the current or previous owners) The value of the property in 2004 according to the tax man was 700,000 Euros. By way of a calculation the tax office back estimated the value of the property in 2002 at the date of the original sale at 600,000 euros and asked for 70,000 euros in capital gains tax on the 200,000 euros over and above the 400,000 euros at which it was sold. So in assuming that the seller was going to get 20,000 euros back he was landed with a bill for 70,000 Euros capital gains tax on money he had never received. The tax man assumes the seller put 200,000 euros in his back pocket. This is quite normal in Spain but not in the UK.
How can two of the largest estate agents and a bank under value the property by 200,000 Euros? Present the evidence to a lawyer and they say the tax office does not care.They assume everyone is guilty.Shall we sue the bank and agents for undervaluation. Of course not because they are right and the tax man is wrong.
It gets worse. You can appeal but if you lose they charge you double. Plus you have lawyers fees to pay.You also have to pay all the tax in advance before you appeal. Who would be so stupid and do that when the system is obviously flawed. What you can do? What the spanish tax office says is pay us say 30,000 euros and we will let you off the rest.That is 30,000 euros over the 20,000 they have already got. In other words we think you have been a bad boy but we will let you off some of it, if you pay now.Remember you dont owe it in the first place. You have been trapped and assumed guilty based on all the other black money deals that occur every day and probably known off the record by lawyers dealing with the transaction.
They then apply the pressure by saying 'pay the 30,000 in two weeks or you will have to pay the 70,000Euros. If you dont we will fine you an additional 15,000 euros for late payment as well.'
So from selling a property at 400,000 euros based on qualified valuations and expecting 20,000 back after your sale, you end up paying 105,000 euros in tax on money you never had.
This is great coming from the spanish tax man who takes no notice of qualified valuations.There is nothing you can do. They manipulate the situation to keep your 20% by applying the pressure.The spanish however in higher authority are always taking cash for favours ( normally planning gain) 14 of the 26 councillers who run Marbella town hall are in court for coruption. The mayor of Manilva was caught with 800,000 Euros in his house in plastic bags.The innocent UK seller however gets persecuted and the worst thing is that no one cares.
If there are any lessons from this that need to be passed on to the European Public is that do not listen to qualified valuers or even qualified estate agents when selling your property in Spain.Get your lawyer to ensure that the Spanish tax authorities are happy with your sale price before you sell or possibly suffer the headache above.Also make sure you have trustworthy lawyers.
This dispute is still not resolved