Buyers in the UK can get confused with the different property valuations. The difference between an insurance valuation for rebuilding cost purposes is at serious odds to the the market value, the price that a buyer is prepared to pay to acquire that property. And so in Spain, you will come across different values for property:
Spanish Homes, Spanish Property Pre-purchase stage
Spanish Property-Valuation value
This is the value assessed by a bank for mortgage approval purposes.
Spanish Property-Market value
Depending on the market, a real estate agent or property valuer will give an estimate of a property’s current market value.
This is the value assessed by the tax authorities and is the minimum value that should be declared on the Title Deed when a sale takes place. When a buyer is purchasing a resale, the fiscal value must be obtained from the “oficina liquidadora”. A copy of the Title Deed and last IBI receipt (Property Tax- annual Municipal Tax based on the “Valor Catastral” or rateable Value) should be taken into account.
Spanish Home-Declared Value and Sales price
The declared value is the sales price of the property. All the costs and taxes are based on the sales price.
In the past, many buyers have not always declared the full sales price officially, in order to reduce taxes they pay at the time of buying. This is why it is tricky to trully know what Spanish property prices are doing because the official data is not always that accurate, given some of these types of transactions. Some of the price difference was paid in cash to the seller, so they got the price they wanted and this has been dubbed the „black market“ It meant the buyer paid less transfer tax (ITP) and the seller had a smaller capital gains tax liability.
The Spanish authorities have been tightening up in this area and are waking up to penalising Spanish Home Buyers for doing this. What’s more the tax authorities can claim higher tax, at a later date, sometimes up to 4 years after the transaction has occurred, if they consider the buyers bought significantly below market pricing at the time of purchase. It is referred to as the Complementary Tax. It is in effect claiming back the difference the tax man may consider was owed, according to their valuation (a Minimum Market Value or MMV) versus what was actually declared.
The minimum Spanish Property value provided must at least equate to value showing in the Title Deeds and never lower, otherwise the buyer will receive a Complementary Tax notification.
There is always the possibility of appeal against this and of course a Spanish Home Buyer has a much stronger argument if they have a paper trail to prove the declared value of the property in Spain is the same as the official purchase price on Title Deeds. But it is wise to budget accordingly and act swiftly if this situation arises.
The minimum value provided will be the value to be on the Deeds and never lower, otherwise the Spanish Home Buyer are more likely to receive a Complementary Tax notification.
Spanish Homes, Spanish Property Post-sales
Catastral value, “Valor Catastral“
The “Catastro” office registers property in Spain, but it deals more with the exact location, physical description and boundaries; unlike the Spanish Property Registry which deals more with ownership and Title.
The “catastro” office is also the source of the “valor catastral” the rateable value, the assessed value of the property used in the calculation of local rates.
The figure is normally considerably lower than the real market value. If you are purchasing a new property in Spain, it will not have been assigned a “Valor Catastral”, it therefore becomes the buyer’s responsibility to register the property in Spain at the “catastro” office for this tax.
An existing Spanish property should already have its own “Valor Catastral”. The annual real estate tax- IBI, charged by the municipality, will be calculated based on the “Valor Catastral”.
Your property agent and independent lawyer can help check all these things are in place for you, to make the process safer for you to buy your dream home abroad, in Spain.
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