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I bought a property cheap from the vendor, as there were no agent fees. Can the taxman demand more tax?

Tax Law

Antonio Flores Vila

6th of February 2001

Q. Congratulations on an excellent and very interesting website.

Having read all of your archive questions a number refer to additional demands for tax on the purchase price being made sometime after a property has been bought. Last year I bought a rustic property privately - not through an estate agent - from someone (a Spanish resident) who was know to friends of mine. The correct price was declared but I did obtain it a very good price as the seller saved on agents fees and I was able to buy very quickly. The correct tax was paid.

Is it now possible that I could receive a demand for additional tax if the Authorities think the price I paid was too low? If so how long is it likely to be before that happens? 6 months - a year or is there no time limit? Is there a point when I can assume that I will not receive a further demand?

Bournemouth, England

    A. We are glad you found the information on the web page interesting and useful.

    With regards to your questions, I let you know the following: You could receive a demand for addittional tax if the authorities thought the price declared in the deeds was to low. However, I doubt that will happen as you have purchased rustic land, which is usually difficult to give a price to. In addittion to that, I doubt the relevant tax authority will have a listed assessed value of that property.

    However, the Tax man, especially in Spain, is unpredictable in its conclusions and they could demand further tax for the ´unpaid´ amount. The time limit for this to happen is 4 years, which is a prescription period. After that, the taxman has lost the possibility to charge, unless the period was broken by a notification.

    It is normal to receive a further demand for tax between 1 year and 1,5 years after the purchase. This however may vary from place to place, as the 6% tax you must have paid (for rustic property) is dealt with by the regional tax authority.

    Always remember that the decision made by the taxman is not necessarily the correct one and that you are able to challenge it legally.

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