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Beating the Spanish tax man? PDF
Tuesday, 12 July 2011 11:24

Catastral values and tax

The practice of under-declaring a property’s value in the escritura, or deed, to avoid taxes has to some extent disappeared in Spain in recent years. Once upon a time everybody was at it. Vendor and purchaser obviously, but also estate agents and lawyers  -  even notaries turned a blind eye - and it seemed to be condoned. It was all part of the long-accepted tradition of low-level corruption in Spain.

But things have tightened up. I’ve transacted a few houses in Spain in my time and most estate agents and lawyers are no longer prepared to get involved, as fines can be heavy.

This is the situation. Every property has a valor catastral, a value for tax purposes. This may have nothing whatsoever to do with the real value, as valuations in many areas are well out of date, and this valor certainly does not relate to market value.

To counteract the fact that property valuations are out of date, each town and village has a coefficient, or multiplier, by which the valor catastral is multiplied to arrive at a more accurate valuation for tax purposes. Hacienda use this to try and prevent loss of revenue through under-declaring the price when properties change hands.

So, for example, we have an apartment in Ronda (Málaga) with a valor catastral of just over 17,300€. The coefficient for Ronda is a massive 4.2 because property values have not been re-assessed since 1998. That makes the valuation of my apartment for tax purposes 72,660€.

The market value is much higher, however, at around double that figure. So the system is by no means perfect, because if we were to sell we could under-declare massively and presumably get away with it! Not that we would, of course! Anyway, we’re not selling.

In nearby Montejaque the situation is very different. Here the coefficient is just 1.8 because properties were re-valued as recently as 2007. A friend of ours owns a house there with a valor catastral of nearly 92,800€ which makes its value for tax purposes 167,040€. It's market value is around 180,000€, so that’s a little more accurate.

If the authorities think you’ve under-declared to avoid paying tax, you could be in for a shock. You could be hit by a big tax bill for the shortfall and a fine to boot. You have been warned.

To find out the valor catastral of your property, look on your IBI receipt. Multipliers for Andalucía can be found here.

© Paul Whitelock

 A similar article also appears on the Olive Press website. Click here.

Tags: Spanish tax, catastral value, valor catastral, escritura, deed, under-declaring, coefficient, multiplier, hacienda, market value, property valuation, IBI, Olive Press, paul whitelock



Paul Whitelock

Paul is a Joint Honours graduate in Spanish and German, a qualified teacher (PGCE) and has a Member of the Institute of Linguists (MIL) qualification.

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