Expat homeowners should not fear retrospective Spanish stamp duty

Some recent homeowners in Spain have been asked to pay retrospective Stamp Duty tax top-ups, but the scale of the problem is not so large

Reports last week in the Daily Mail have suggested that thousands of Brits who own property in Spain may be faced with a shock tax bill as the Spanish government seeks to claw-back ‘underpaid’ stamp duty.

However, the true risk of being handed a surprise retrospective tax bill is quite small, and those British homeowners who do receive a demand for extra payment are entitled to appeal…

But let’s back up a little. The Spanish government has begun re-examining transactions involving resale properties in Spain sold in the past four years under the belief that many new homeowners underpaid for their property.

The chief area of concern revolves around Spain’s stamp duty equivalent, the Impuesto de Transmisiones Patrimoniales (ITP). According to sources in Spain, the government is scouring tens of thousands of recent transactions for deals where the buyer is believed to have paid too little of the ITP tax.

Although ITP rates vary across the country, the average is seven per cent of the property’s registered value. Now, as property prices fell over the past four years, Spain’s tax authorities are fearful that a number of buyers may have snapped up their homes for less than the going rate.

One case study cited by the Daily Mail finds a homeowner who paid €83,000 for a property in Valencia that should have sold for around €100,000. The Spanish tax office has since sent a letter requesting an extra €1,900 in tax to make up for the shortfall.

Similar letters have been reported as being received by homeowners asking to pay the ITP difference for properties where the sale price does not match the taxman’s own official valuation.

Although this practice has long been something the Spanish tax authorities have pursued, efforts to re-examine recent transactions have been stepped up in recent months as the government seeks to increase its tax take wherever it can.

However, very few of the tens of thousands of resale properties sold across Spain since 2011 would have been deliberately priced below official market value. Yes, prices were suppressed, but rarely artificially so – cheaper property between 2011 and 2014 was merely as a result of market pressures driving down value.

The trend for ‘distressed properties’ may have created a short-lived market for deliberately depressed property prices, but largely, Spanish property has been priced fairly in most regions, particularly the Costa del Sol.

If you have bought a property in Spain in the past four years and fear that you may be hit with a similar tax bill, it would be a good idea to speak to your local tax office to enquire whether you may have to make further payments on any underpaid ITP.

If, however, you are in the process of purchasing a property in Spain, then simply ensure that you get a fully verified, independent property valuation, and keep an open dialogue with the authorities that oversee the ITP.