The Spanish tax man is looking at ways to get more money out of expat property investors by reviewing thousands of house purchases.
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The tax man claims tens of thousands of property deals took place at undervalued prices and purchasers paid to little stamp duty – Impuesto de Transmisiones Patrimoniales.
As a result buyers who bought at hefty discounts could receive bills for more stamp duty.
The move comes a few months after the Spanish tax authorities lost a landmark case in the European Courts of Justice which ruled expats and foreign home owners were discriminated against because they had to pay higher capital gains tax on selling property than Spanish nationals.
Now, the government is combing through house sale details that took place over the past four years to make sure buyers paid the market value for property.
During that time, the bottom dropped out of the Spanish property market, and at one point, homes lost up to 50% of their value as buyers disappeared and developers went bankrupt.
In many cases, banks foreclosed and repossessed homes and then sold them in cut-price deals to foreign buyers.
On purchase, buyers paid around 7% of the purchase price as stamp duty, but the tax authority is arguing that in thousands of cases, the price was artificially deflated and the stamp duty paid was less than it should have been.
The tax man is now revaluing thousands of homes to see if the official market valuation matches the sale price. If it doesn’t, then a stamp duty bill will go out to the owner.
Unlike the UK, house prices in Spain only hit rock bottom last year and October was the first time for six years that an increase in prices was reported – and that was a miserly 0.8%.
The latest figures from the Spanish Ministry of Development posted results that showed between January and September last year, expats ploughed £4.8 million into buying permanent homes in the country.
The figures are 28% up on the comparable period 12 months earlier.
Most of the purchases were existing rather than new homes.
According to the figures, most expats bought in Valencia – and nearly all the money spent there was in and around Alicante. The next most popular destinations were Andalucia and Catalonia.
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