Gecko Towers
I have blogged several times before on the sometimes vexing issue of the “Buying Costs of a Property in Marbella” – please see previous post here The buying costs of a property purchase in the Marbella region? – and how the Regional Government in Seville has made important concessions on the headline rate of Andalucia’s “Property Transfer Tax and Stamp Duty holiday” have been made permanent.
Well, as we slip into 2022 a curious announcement from central government concerning the way that the ITP (more later) due on the purchase of your Marbella property has changed. It may well result in the need to pay more tax. Arguably, this just a tax increase without the bad press. Many commentators, who note that property buying costs are already reasonably high, see this move as a little ill conceived.
Some who have already started their property buying journey and, possibly already committed to a purchase, may well be hit by the need to pay higher taxes. Please do not ignore this recent change in the calculation of your property purchase costs.
Put simply the calculation of the ITP (Impuesto de Transmisiones Patrimoniales/Property Transfer Tax) which was historically based on the declared property sales price (paid by the the buyer to the seller) – as per the Sales paperwork – has been altered.
In Andalucia, the ITP is still pegged at 7%.
As from 1st January 2022, Spain’s Finance Ministry has announced that the formula for calculating the amount upon which the ITP is charged is to vary. The calculation will now be based on the higher of the declared purchase price paid by the buyer to the seller – as declared at completion – or the so-called “Cadastral Reference Value”.
The Cadastral Registry is a Spanish state owned body that is given the responsibility of recording data concerning property and plot house sales and the sales prices achieved. It is intended that the Catastral Registry should regularly, it is suggested annually, revise the so-called “Cadastral Reference Values” for each micro-location throughout Spain and the Islands.
In theory, this is a good way to record and assess property’s value. However, there are several immediate flaws.
Firstly, if no property sales takes place in a particular location there are no “new” yardsticks against which to calculate an updated “Reference Value.”
Furthermore, the Catastral Reference Value takes limited account of the internal condition,configuration or finish of a property being more impressed by M2 of the property’s build, terraces and plot size. So neighbouring fifty year old properties will usually carry the same Reference Value even if one has undergone substantial renovation whereas the neighbour hasn’t.
Finally, and with digital recording of purchase price data this should become largely automated, but there are situations where Catastral Values have not been regularly updated and are out of date. While this may mean a “lower” Reference Value there are situations where properties have been sold with negative equity thus distorting the more realistic value.
There is a slight concession in the recently posted rules. If the Catastral Reference Value is higher than the price actually being paid there is the ability to apply a 10% reduction to the prevailing Catastral Reference Value to calculate the precise property’s tax value used for the ITP calculation.
Historically, there was a significant amount of under-declaration of the actual price paid to sellers by buyers as a fair percentage of property transactions included a payment in cash. This depressed the transactions declared value.
It is relatively simple for you to check the Catastral Reference Value of the property you are interested in, ask your Abogado to do it if you are uncertain as they will know the system well.
It is very important to note that this change only affects only resale or second hand properties. The purchaser of a new property is still obliged to pay IVA (Value Added Tax) on completion of their purchase that currently sits at 10% of the full price paid.
Should you be interested in discussing the legal process involved in buying a property in the Marbella region, we would be delighted to assist you. Our multi-disciplinary team of bi-lingual, highly experienced and wholly independent Abogados and Asesores Fiscales are ready to help you.
Please call me, Mark FR Wilkins, during usual business hours on +34 600 343 917 or, if you prefer, or e-mail me at mark@roslegal.es
Please note that our posts are for general interest. There is no substitute for proper legal advice tailored to your specific circumstances as provided by a qualified Abogado who is experienced in the application of the Spanish Law.
Nothing contained in this article should be seen or taken as the writer or the publisher providing legal or financial advice.
© Mark FR Wilkins 2022. All rights reserved.