Spanish Property Tax Trap

May 9, 2011 - PRLog -- There is good news for Britons considering a Spanish property purchase. Prices have been reducing over the last few years of correction after ten years of booming prices. Prices have now stabilised at what appears to be the bottom of the market cycle. This means that British buyers now have the opportunity to obtain an excellent property at prices discounted by up to one third of what they were at the peak of the boom.

To add to this good news, the Spanish banks are being forced by their regulator, the Bank of Spain to significantly reduce their holdings of repossessed properties by September 2011. Thousands of such properties have been released over the last few weeks, but this does not seem to have affected prices. What has happened is that the rate of enquiries received by property agents has increased, especially from foreign buyers. These releases of repossessed properties mean that British buyers have an increased amount of cheap properties to choose from.

However, Michael Liggan of Altavista Property Spain of Malaga has sounded a note of caution to buyers dealing directly with the banks. He says that buyers must check what is known as the “lmpuesto Sobre Bienes lnmuebles”, or IBI. This is the Spanish equivalent of Council Tax. Unlike in the UK, this tax is levied on the property, not the owner. Where a property has been repossessed, it is more likely that the owner has not paid his tax for several years. It could be that up to five years’ of tax has not been paid. Michael said that it is imperative for an intending buyer to ensure that the IBI has been paid up to date. The new owners may find that they have to pay the outstanding tax once they have acquired possession of the property.

Michael Liggan added that part of the paperwork involved during every Spanish property sale is the Referencia Catastral, which is a document detailing the location, physical description and boundaries of the property. The difficulty comes in that the property tax system does not communicate with the property registry. This means that an unaware buyer will not be automatically made aware of outstanding taxes and may have to pay a tax that the previous owner should have paid.

Using an established and reputable estate agent such as Altavista Spain will help minimize the risks of buying a property with any outstanding taxes or other debts, but Michael Liggan suggests always employing the services of a qualified Spanish lawyer to oversee your whole transaction in order to ensure peace of mind and a stree free purchase of your dream home in Spain.

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Alta Vista Spain is a real estate company in Marbella on the Costa del Sol, Spain. Michael Liggan is a driving force and our chief property bargain hunter.