|Anyone thinking of buying a second home in Spain should beware of ancient tax loopholes, which could have a serious impact on their finances, says the National Association of Estate Agents (NAEA) in an October 12 article carried on its website.|
Overseas purchasers, it notes, are often unaware of a tradition of misquoting property prices in order to avoid high tax payments, says Ian Tonge, chair of the NAEA International Working group.
“The value of a home can have been shown on Spanish land registry documents as a lower figure for decades, in order that less tax is paid,” he explains. “This means that if the local authority wants to purchase the land today, as has been highlighted in recent cases in Valencia, proving how much it is worth can be very difficult.
“Historically, people have been reluctant to put in the full price on their documents because that would force them to pay more tax than the gain they had made on the property,” he continues.
“If their property is then needed for road widening purposes, for example, they will only receive the government’s recorded value on it, and will be unable to prove that they are owed more.
Purchasers in Spain must be careful to declare the true value of their property to protect themselves.”Since its inclusion in the EU community, the Spanish government has been reviewing the tax situation.
In the meantime the NAEA recommends that purchasers considering investment in Spain are careful to ensure that the price on all documents relating to their house purchase is correct. Chief Executive of the NAEA Peter Bolton King says; “Qualified independent legal advice should be taken whenever property is bought overseas, and purchasers should seek sound advice from a recognised estate agent, whether in the UK or overseas, who follows the international charter.”