There’s been a new law that’s come in on the 1st of January this year when it comes to assessing the taxable value of properties here on the Costa del Sol. It used to be the case that a property would have, obviously they’d have the sales value of the property, the price that you as a buyer are willing to pay, but then behind all that there would be a cadastral value which you would have to go through a few records and stuff to find. And that is normally much lower than the actual sales price.

Then you multiply the cadastral value by a certain coefficient. So if you’re in Benahavis it’s multiplied by this amount, if you’re in Marbella it’s multiplied by this amount, and you come to this fictitious amount that property is worth in the tax office. And normally if you’re buying a property for say million euros, the fictitious amount in the tax office will be 600,000, 700,000. And what it means is that when you come to buy your property you pay transfer tax on whichever is the higher amount. Okay, so in this case if you’re buying at a million and the cadastral value and the imputed value, if you like is six, 700,000, then you would pay the transfer tax on the million. Fair enough.

The problems start when the imputed value is higher than the price that you’re actually paying. And we’ve had a couple of examples, well, one example of it recently, which has caused us major, major headaches. And it’s because there’s a new law now in Spain which has taken away the way they calculate this imputed value. So what they do is they actually have a value now attached to each property on the register. So it’s not dependent on the cadastral value times the coefficient. It’s now, you go in online, there’s a website. You can go in, you can plug in the cadastral reference number of the property, and it will come up with what they call the Valor de Referencia. Okay, and that is the amount now that they use as the taxable base.

So we had a situation the other day where we had two lovely clients all the way from the US. We found a property that they really liked and we were kind of negotiating on a price of around 600, maybe 700,000 Euros. It was a big, big villa on a big plot of land but it wasn’t in the best of conditions. It was run down, it needed a huge amount of work and the plot was actually just above a sewage plant. So it wasn’t the easiest kind of property to sell. Anyway, we thought, yeah, let’s try and get this property at a decent price and then we can maybe spend some money on reforming it. And then we looked at the new Valor de Referencia and the way they calculated it, and it was 3 million Euros, which means that unless we could successfully appeal against that value, it would mean that my clients would’ve had to pay 7% transfer tax not on the 600,000 Euros that they were hoping to spend, but on the 3 million Euros. So they might have got it for 600,000 but they then would’ve had to pay 7% of 3 million, so 210,000 Euros in taxes. So that obviously put them off and they were here to buy. They were here to make a decision, but this put a huge spanner in the works, because as you can imagine to appeal something like that, isn’t going to happen well, to actually get the appeal going is not going to happen overnight. And certainly to get a response and a decision, that’s not going to happen overnight as well. So you’re looking at maybe six months down the line to get a decision.

So we turned our attentions elsewhere, and eventually we looked at another property and that was done. But it’s a problem, it’s a problem for the vendors, because how are they going to sell their property? They’re going to have to maybe do the appeal themselves and how is a buyer ever going to come along and be happy with that? So it’s just something to watch out for. It rarely happens. You know, I personally have never been affected by it but just one or two, sometimes if you think you’re getting a real bargain and on paper it looks like a bargain, chances are there may be a sting in the tail there, and you may, well you will need to ask your agent certainly your lawyer just to check what the Valour de Referencia is, otherwise you may end up paying a little bit more tax than you bargained for. The example I’ve given is an extreme example. I checked that same day another 10 or 12 properties that we had on our books, our listings, and the Valor de Referencia was well below the asking price. But there was another one that was a little bit close to the edge. So just be careful. It’s not something that should put you off buying but it is something that needs checking, because who wants to pay a load of tax on something when you’ve just picked up a good deal? So, just to let you know that the law has changed and it’s something to watch out for.