The Spanish authorities suspect that thousands of expats – who purchased homes in Spain over the past four years –have artificially reduced property values in order to evade the Impuesto de Transmisiones Patrimoniales (ITP), Spain’s equivalent of stamp duty.
As a result, these home owners are getting notices asking them to pay more ITP, in addition to what they paid at the time of purchase, according to media reports.
ITP is a percentage of the house’s value, paid to the government when a property is bought. Though it varies by region, it is about 7% on average.
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The Spanish authorities suspect that the property values were artificially reduced in documents, so that the purchaser could evade the ITP. Now the authorities are scanning property deals over the past four years to determine the “real value” of the property compared to the declared sales price. The purchasers are being asked to pay the difference in ITP.
Property values slumped in Spain after the 2008 financial crisis. But as prices have now apparently bottomed out there has been a rush of foreign buyers over the past couple of years. Property transactions rose by 20% year-on-year in 2014, according to the National Institute of Statistics (INE).
There’s been a steep jump in mortgages issued, and a slight increase in nominal property prices, according the major Spanish real estate agency Tinsa. However in inflation-adjusted terms, Spanish real estate prices are still falling.
This article was republished with permission from Global Property Guide.