Canarian Weekly
09-01-2015, 12:50
BRITISH expats who cashed in on the recession and bought Spanish homes for a song are being hit with shock tax bills,
Spain’s cash-strapped government is probing thousands of sales which took place over the past four years because it believes the owners got too good a deal.
Since the 2008 financial crisis, house prices have fallen by nearly 50% in some areas, and the country is recovering from a deep recession.
Estate agents’ windows are packed with homes going for a pittance as anxious sellers seek buyers.
A five-bedroom country house with a large private pool, 10 miles from Malaga in the town of Cartama Estacion, has dropped from £214,500 to £184,000.
A four-bedroom country house in Olula del Rio town, Almeria, is going for just £43,272.
Spanish mortgage rates have also fallen dramatically and it is possible to get a variable-rate deal at 2.75%, says mortgage broker Simon Conn.
Buyers with an eye for a bargain have been haggling prices even lower because they know many sellers are desperate to sell.
But expats who snap up their dream homes at rock-bottom prices risk falling foul of the tax trap.
In Spain, as in Britain, the buyer must pay sales tax on the property. This is known as Impuesto de Transmisiones Patrimoniales (ITP).
It is paid as a percentage of the value of the house. The exact figure varies, depending on what type of property is being bought and where it is in the country.
But since the property market crash, this tax flowing into the Government’s coffers is merely dribbling in.
Now, tax authorities are combing through home sales completed the past four years and comparing the declared sales price with what they believe the real value is.
If a house sale price does not match the taxman’s own official valuation, the owner is asked to pay the difference in stamp duty. In some cases, this can run to thousands of pounds.
Bob and Kay Rogers have been asked for an extra £1,500 sales tax three years after buying a home in Miramar, near Valencia.
The semi-retired couple, who work part-time as English teachers in a local school, bought the two-bedroom house near the sea in 2011. They haggled the price down 2,000 euros to 83,000 euros (around £65,300).
They put down £18,100 and took out a mortgage worth £47,200. Having bought in Spain before, they took care to make sure they paid their ITP, worth around 7% per cent of the price tag – handing £4,571 to the authorities.
Three months ago, they received a letter from the local government of Valencia, which estimated the house was, in fact, worth £81,627 and the Rogers should hand over an extra £1,100 in sales tax. The couple tried to protest but have been told they must pay up.
The sum they owe has now climbed to £1,500 after the local authorities applied interest because of the delay.
Bob, 60, says: “We have made every effort to do things by the book and are honest, upstanding citizens. If anything, the house is worth even less than we paid for it today as prices are still tumbling.
“We have since found there are a huge number of people in this position – retirees on low, fixed incomes who suddenly find themselves having to pay this new tax out of dwindling savings, despite having done nothing wrong.’
Although the Spanish authorities have had the power to review sale prices for years, experts say the number of letters sent to expats and locals has soared since the financial downturn.
Peter Esders, director and Spanish property law expert at legal services firm Judicare, says: “You can find some great bargains in Spain. But the authorities sometimes do not believe that the buyer got such a great deal.
“Also, they desperately need more tax revenue and are now looking at transactions which they would probably not have looked at previously.”
It is possible to appeal f you receive such a bill, but make sure you have all papers relating to the transaction.
If you are in the process of buying a house in Spain, speak to the local tax authorities about how much to declare.
More... (http://www.canarianweekly.com/bargain-buyers-taxing-problem/)
Spain’s cash-strapped government is probing thousands of sales which took place over the past four years because it believes the owners got too good a deal.
Since the 2008 financial crisis, house prices have fallen by nearly 50% in some areas, and the country is recovering from a deep recession.
Estate agents’ windows are packed with homes going for a pittance as anxious sellers seek buyers.
A five-bedroom country house with a large private pool, 10 miles from Malaga in the town of Cartama Estacion, has dropped from £214,500 to £184,000.
A four-bedroom country house in Olula del Rio town, Almeria, is going for just £43,272.
Spanish mortgage rates have also fallen dramatically and it is possible to get a variable-rate deal at 2.75%, says mortgage broker Simon Conn.
Buyers with an eye for a bargain have been haggling prices even lower because they know many sellers are desperate to sell.
But expats who snap up their dream homes at rock-bottom prices risk falling foul of the tax trap.
In Spain, as in Britain, the buyer must pay sales tax on the property. This is known as Impuesto de Transmisiones Patrimoniales (ITP).
It is paid as a percentage of the value of the house. The exact figure varies, depending on what type of property is being bought and where it is in the country.
But since the property market crash, this tax flowing into the Government’s coffers is merely dribbling in.
Now, tax authorities are combing through home sales completed the past four years and comparing the declared sales price with what they believe the real value is.
If a house sale price does not match the taxman’s own official valuation, the owner is asked to pay the difference in stamp duty. In some cases, this can run to thousands of pounds.
Bob and Kay Rogers have been asked for an extra £1,500 sales tax three years after buying a home in Miramar, near Valencia.
The semi-retired couple, who work part-time as English teachers in a local school, bought the two-bedroom house near the sea in 2011. They haggled the price down 2,000 euros to 83,000 euros (around £65,300).
They put down £18,100 and took out a mortgage worth £47,200. Having bought in Spain before, they took care to make sure they paid their ITP, worth around 7% per cent of the price tag – handing £4,571 to the authorities.
Three months ago, they received a letter from the local government of Valencia, which estimated the house was, in fact, worth £81,627 and the Rogers should hand over an extra £1,100 in sales tax. The couple tried to protest but have been told they must pay up.
The sum they owe has now climbed to £1,500 after the local authorities applied interest because of the delay.
Bob, 60, says: “We have made every effort to do things by the book and are honest, upstanding citizens. If anything, the house is worth even less than we paid for it today as prices are still tumbling.
“We have since found there are a huge number of people in this position – retirees on low, fixed incomes who suddenly find themselves having to pay this new tax out of dwindling savings, despite having done nothing wrong.’
Although the Spanish authorities have had the power to review sale prices for years, experts say the number of letters sent to expats and locals has soared since the financial downturn.
Peter Esders, director and Spanish property law expert at legal services firm Judicare, says: “You can find some great bargains in Spain. But the authorities sometimes do not believe that the buyer got such a great deal.
“Also, they desperately need more tax revenue and are now looking at transactions which they would probably not have looked at previously.”
It is possible to appeal f you receive such a bill, but make sure you have all papers relating to the transaction.
If you are in the process of buying a house in Spain, speak to the local tax authorities about how much to declare.
More... (http://www.canarianweekly.com/bargain-buyers-taxing-problem/)