Approximately one million Britons live in Spain permanently or maintain holiday homes there.
The worst effects of the global recession have seen property prices plummet, representing a golden opportunity to pick up relative bargains. For those unable to sell, it provides a significant headache.
Fewer and cheaper sales not only spell bad news for owners and vendors - they have also caused concern on the part of Spain’s tax authorities, which have seen their take decrease due to the slowdown in the property market.
In order to reverse the situation, tax officials have taken more proactive steps, resulting in an increase in reviews of sale prices and the transfer taxes paid when properties are bought. It’s a step that can have consequences for buyers a number of years after ownership of the homes in question has changed hands.
This price review is a valid long-standing tax measure under Spanish property law. However, it is not necessarily apparent or brought to the attention of those eager to start life overseas.
When recession struck, the amount of transfer tax – called impuesto de transmisiones patrimoniales (ITP) – pouring into official coffers decreased significantly owing to the reduced number of sales and/or lower prices.
Under the terms of the Spanish law Ley del Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados, enacted in 1993, regional tax authorities have powers to examine all property purchases in order to ensure that the correct amount of ITP is paid by the buyer.
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