Many overseas investors are currently considering buying in Spain as significant falls in property prices mean there are plenty of great value properties on offer. However, a new report by the Daily Mail has found that purchasers are being stung for thousands of pounds in property taxes after the purchase has been completed.
Tax on property valuations
Rather than property taxes being paid on the purchase price of a Spanish property, overseas investors are discovering that taxes are due on the value of a property, which can be far in excess of what they paid for it.
The Daily Mail reports that Neil and Lynda Hunter bought a three-bedroom Cost del Sol villa with pool in 2009 for €400,000. Whilst the couple paid around €30,000 in land registry tax, in October the Malaga provincial authorities declared the villa\'s true value to be €465,000 and demanded a further €4,800 (£4,000) in tax.
“Would-be buyers need to be aware that these stealth taxes can be levied after the sale,” says Neil. “We were obviously aware that Spanish property has fallen considerably in value and were looking for a discount on the price. But we did not get an amazing bargain.”
Authorities seeking to maximise tax revenue
Spanish authorities are keen to maximise tax revenue and so many properties have been re-valued way above their purchase price. Whilst many people have successfully challenged these valuations through the courts, the average cost of the court bills and fees can be as high as €3,000.
The tax demand can be made up to three years after the sale and is levied on all purchasers, not just those from overseas.
Mr Hunter said, “The value of a property is whatever someone is prepared to pay for it, and this is extortion.”
Are you looking to buy property in Spain ? Estepona , Torrevieja , Orihuela Costa , Ciudad Quesada , Puerto De Mazarron
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