Taxes on Spanish Property Purchases in 2022

Those of you who listen to our podcast might have heard a lot of this post in the last episode. You too can hear it here along with a lot more information (Also make sure to subscribe for more episodes as they are released each Friday) However, we thought it was better to release this information here too as the more knowledge you have the better informed your decision to purchase Valencia Property will be and it might make more sense written down as there are lots of ifs, buts, maybes and numbers involved.


Knowing how much you might pay on tax on purchase of your Valencia Property or any other property in Spain has just got more complicated. The basis of the tax has been a percentage of the selling price since time immemorial, recently that has been 10% in the Valencia region, which is too much of course but is offset by the ongoing taxes which are really really low compared with other countries. I have written an article about this of course which you can find by clicking that link. Now, however, there has been a change. The tax you pay will still be 10% of the purchase cost in 80-90% of cases on purchase but sometimes, especially if you get a fantastic bargain, it may be more. This is because the tax is now being estimated on something called the Reference Value of the property in the property registry.

The first thing to say is that the reference value of the property has got nothing to do with the asking or selling price. It can vary to the lower of higher side. In the last week we have seen reference values over 40% below the sale price and 20% above. However of the over 20 properties we have agreed a deal on in 2022 only two have been above the reference value.

So let’s get into the weeds and figures.

One client buying an apartment in Valencia has an agreed price of 125k. The reference value is 86k. And the tax therefore is based on the sale price. 12500 Euros or 10%. If the tax was based on the reference value then it would be 90% of 8600 as that is the calculation the tax office is using for reference values. However, you pay the higher of the two figures. In other words if the reference value is below the sale price you pay the 10% on the sale price of course. 

On the other hand what happens if your reference value is above the sale price? That has happened twice this week, firstly an apartment at 185k had a reference value of 212k. Therefore the tax of 90% of 10% of 212k is applicable, ie 18,880 Euros as opposed to 18500 Euros if the sale price was used as the value, an increase of 380 Euros so not great but not too bad either.

The other case is a bit more worrying,

The sale price was a bargain at 305k but the reference value was 386k meaning a tax bill of 90% of 38600 ie 34740 Euros. If the sale price were to be used then the buyer would have had a tax bill of 30,500 Euros so that’s an increase of 4240 Euros, just under 1.5% of the reference value higher. And the problem here is that we cannot appeal it because the house is in stunning condition and the owner has a much higher offer on it two days before completion but refused it as we had made sure that a large deposit was left. (as you probably know if an owner pulls out after deposit is left then they have to pay double the deposit back). 

So what’s the news here. Well, if you get an absolute bargain then it may be that you have to pay a higher rate because the reference value may be higher. Equally though you can appeal if the state of the property is really bad as the reference value uses the comparative method of recent local sales. To do this you need to appeal and provide evidence of why the reference value is wrong i.e, photos of the state of the property, any structural issues and more.

You aren’t guaranteed to win but we foresee a huge backlog of cases coming to court in the future as this system is essentially unworkable. The same system has been in place in La Rioja and Navarra for six years and the courts are backed up with appeals!

One thing though, we will always let you know how much your reference value is and therefore how much tax you may be liable for because it is relatively easy to find out the reference value of a property. Here is the link to the Catastro from where you can find it out. From there you can go to the red box that says “Valor de referencia” and if you have the details of a property, and your NIE, you can check it. Don’t worry though we will do that for any property you might be interested in to let you know the potential for any surprises before putting any money down.

One thing though, if the Valor de Referencia is lower it doesn’t mean the owner will negotiate on price more. As stated at the start of this article the Reference Value has nothing to do with sale prices yet. It may do in the future as it becomes more consolidated but at the moment it’s all over the place. 


The VP Podcast Competition

Also as announced on the Podcast we have a competition going on to win the books below.

We want the podcast to get heard by as many people as possible who might be interested in Valencia Property. Therefore we are running a little competition. It will last for two weeks from last Friday, the 18th of February, and the prize will be two books in the picture.

First is a book by renowned photographer Robert Frank from his visit to Valencia in 1952. Get to know the city in the earlier years of Franco with images from the beach, Fallas and more. We contrast that with “Valencia en Grafitis“, a book that looks at all of the popular street artists in Valencia with features of their work.

So, what do you have to do to win these fabulous prizes? Well there are just a few things.

1) Leave us a review on Apple Podcasts. You can see the link here. You need to go into the Apple Podcasts app if on a Mac and scroll down to the bottom to see “Write a review”

(Equally if you prefer to listen to your podcasts on Spotify, Stitcher, Podbean or others you could leave us another review there too just to be nice ;-))


2) Share the podcast on your favourite social media and screenshot the post, or even posts if you really want to get more brownie points (You might even want to tag us on Twitter @grahunt, Facebook (Valencia Property) and Instagram @grahunt if you are that way inclined).


3) Answer the 4 questions that we ask in the podcast. To find out the questions listen to Episode 7 here.

4) Once done then send us a mail to information@valencia-property.com with the screenshots and the name you used on the Apple Podcast Review along with your four answers. On the podcast in 3 weeks time we will have a draw for the winner and if your name is announced we will contact you to get details to send you your prize. We will send the books anywhere in the World but would prefer to present them in person of course if you are around. If you have any questions then just tag me on Twitter @grahunt.

We already have a few people who have done all of the steps required and two have got all of the questions right, someone got one of them wrong so if you are that person and you are reading this then try again and change your answer to question 2 😉


Review For The Valencia Property Podcast: This is Great!

If you’re interested in relocating to, or investing in property in Valencia, this is THE podcast. Podcast host and founder of Valencia Property, Graham Hunt, has 20 years knowledge and expertise in the Valencian property market, and this podcast is a reflection of that. Each episode focuses on a different theme such as the buying process, property modernisations, relocating to Valencia/Spain and visa requirements. Graham provides informative, frank and honest advice, insights, news and views into everything Valencian property. As someone who’s looking to relocate to Valencia, it’s a must-listen. Keep up the great work, Graham & team!

Review For The Valencia Property Podcast: Very informative. Quite objective, considering it comes from an agent.

Thanks


Podcast Episode 7.

What’s Happening in the Valencia Property Market

We talked above about the tax changes but there was much more in the seventh episode of the Valencia Property podcast including listener questions, the latest news and events from Valencia and all about what’s happening in the Valencia Property market at the moment. You can listen on the embedded player below.


Golden Visa Property of the Week

Private Villa located just 10 meters from the best beach in Denia “Playa De Les Deveses”. So, this really is first line of the beach. And no, I’m not going to start making cracks about sea-level rise because climate change is deadly serious. There’s many a multi-millionaire is going to find himself homeless as his mansion settles beneath the waves in the next few decades, this is no laughing matter.

Anyway, that’s several years away, so on with the show. The chalet has 4 large rooms for a double bed, one of the rooms is on the top floor with views of the sea and the beach, from which you can see the sunrise, and from which height you will get another couple of years use out of this house.

Living room open to the sea with terrace, fully equipped American kitchen with views of the sea and the pool. On the upper floor, it has a large open space/living room with a fireplace and access to two terraces, one with sea views and the other with views of the pool and mountains.

Large outdoor spaces with terraces, green areas, barbecue area and full exterior Ibizan bathroom to serve the pool and barbecue area. Children’s play area with swing castle. – Oh my God, there are going to be children living here. The horror. I can’t watch.”



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