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Property Transfer Tax (I.T.P) - how calculated?

Property Transfer Tax (I.T.P) - how calculated?

Old Apr 28th 2019, 7:59 am
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Default Property Transfer Tax (I.T.P) - how calculated?

Sorry if this is a basic question. I can't find the answer by googling so thought I'd ask in here instead.

The above tax is paid by the buyer of a resale (or secondhand) property at a rate of around 8% of the property's value. Is this calculated on the price that is paid for the property, or some other valuation? I remember hearing some time ago about people being forced to pay additional tax after the Spanish authorities revalued their properties. Was this ever reversed? Is the revaluing of property an ongoing practice where you can expect to receive a tax bill every few years?

Thanks !
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Old Apr 28th 2019, 8:26 am
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Default Re: Property Transfer Tax (I.T.P) - how calculated?

Originally Posted by In love with forests View Post
Sorry if this is a basic question. I can't find the answer by googling so thought I'd ask in here instead.

The above tax is paid by the buyer of a resale (or secondhand) property at a rate of around 8% of the property's value. Is this calculated on the price that is paid for the property, or some other valuation? I remember hearing some time ago about people being forced to pay additional tax after the Spanish authorities revalued their properties. Was this ever reversed? Is the revaluing of property an ongoing practice where you can expect to receive a tax bill every few years?

Thanks !
ISTR it based on the sale value or the cadastral value - whichever is highest. It is 10% in Comm. Valencia might be 8% where you are though.
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Old Apr 28th 2019, 8:38 am
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Default Re: Property Transfer Tax (I.T.P) - how calculated?

Originally Posted by snikpoh View Post
ISTR it based on the sale value or the cadastral value - whichever is highest.
But let me guess...capital gains is based on the lower value when selling? LOL
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Old Apr 29th 2019, 7:52 pm
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Default Re: Property Transfer Tax (I.T.P) - how calculated?

Originally Posted by In love with forests View Post
Sorry if this is a basic question. I can't find the answer by googling so thought I'd ask in here instead.

The above tax is paid by the buyer of a resale (or secondhand) property at a rate of around 8% of the property's value. Is this calculated on the price that is paid for the property, or some other valuation? I remember hearing some time ago about people being forced to pay additional tax after the Spanish authorities revalued their properties. Was this ever reversed? Is the revaluing of property an ongoing practice where you can expect to receive a tax bill every few years?

Thanks !
The Spanish government introduced the dual concept - sales value or local government cadastral value ( local rateable value ) as a means of fighting the quite common practice of property purchase partially in cash and then declaring a lower value on Registry documentation to reduce the Transfer Tax burden ( and launder some money ) . Most local authorities automatically opt for the "higher tax valuation" for obvious reasons. We were caught by this several years ago as we bought well under market value on a home that the bank was about to foreclose on. About six months after the purchase we got an additional demand based on a much higher valuation .
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Old Apr 29th 2019, 8:50 pm
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Default Re: Property Transfer Tax (I.T.P) - how calculated?

Originally Posted by Loafing Along View Post
The Spanish government introduced the dual concept - sales value or local government cadastral value ( local rateable value ) as a means of fighting the quite common practice of property purchase partially in cash and then declaring a lower value on Registry documentation to reduce the Transfer Tax burden ( and launder some money ) . Most local authorities automatically opt for the "higher tax valuation" for obvious reasons. We were caught by this several years ago as we bought well under market value on a home that the bank was about to foreclose on. About six months after the purchase we got an additional demand based on a much higher valuation .
Thanks for your reply. And sorry you went through that. Did they change the law after you'd bought your property? And then applied the extra tax retrospectively?
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Old Apr 29th 2019, 9:00 pm
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Default Re: Property Transfer Tax (I.T.P) - how calculated?

Originally Posted by snikpoh View Post
ISTR it based on the sale value or the cadastral value - whichever is highest. It is 10% in Comm. Valencia might be 8% where you are though.
Yes, it can be based on the catastral value, but it’s not as simple as that. Each town has a coefficient that is applied to the catastral value to arrive at the “official” value. It can vary from 1 to 4 times the catastral value. The coefficients are published. This calculation is also used for things like wealth tax and inheritance tax and has been used for this for many years.

In the past, the sale value of the property was usually well above this value as catastral values are not changed for many years. It was not a problem, in fact it was often to the benefit of the property owner in cases like IHT when the tax office would accept the, lower, official value for tax purposes.

However when the property market collapsed, the situation often reversed, depending on where you live, and the ‘official” value started to exceed the sale value. There really is no reason why it should come as a surprise to the participants in the sale as all lawyers should know about this and advise the buyer that the sales price is less than the official value and that they should expect to pay extra tax. If they were made aware of this then they could easily have adjusted the sale price to cover the cost of the extra tax.



Last edited by Fred James; Apr 29th 2019 at 9:17 pm.
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Old Apr 29th 2019, 9:00 pm
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Default Re: Property Transfer Tax (I.T.P) - how calculated?

Originally Posted by In love with forests View Post
Thanks for your reply. And sorry you went through that. Did they change the law after you'd bought your property? And then applied the extra tax retrospectively?
No the legislation been in place for many years now but both us and our lawyer surprised by the decision. It came about six months after the original purchase so just slow bureaucracy . I pleaded poverty and paid the difference over 36 months as my way of "fighting back"
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Old Apr 29th 2019, 9:27 pm
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Default Re: Property Transfer Tax (I.T.P) - how calculated?

To add to my previous post, this is an example of the information about the coefficients for the Andalucia region. The same info should be available for every region.

https://www.juntadeandalucia.es/boja/2013/39/12

It can work to your advantage. In the case of our property the official value is about 20% of the real value. That would have been a huge benefit for IHT, but they have recently increased the tax free threshold to €1 million so IHT is no longer an issue.
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Old Apr 30th 2019, 8:40 am
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Default Re: Property Transfer Tax (I.T.P) - how calculated?

Originally Posted by Fred James View Post
To add to my previous post, this is an example of the information about the coefficients for the Andalucia region. The same info should be available for every region.

https://www.juntadeandalucia.es/boja/2013/39/12

It can work to your advantage. In the case of our property the official value is about 20% of the real value. That would have been a huge benefit for IHT, but they have recently increased the tax free threshold to €1 million so IHT is no longer an issue.
Thank you ! That's very helpful. I think i understand now. The ITP is calculated on the price paid OR the fiscal value (catastral value X the coefficient), WHICHEVER IS THE HIGHER.
Is the catastral value of every house made available for public viewing?
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