For several years we have been assisting clients who received letters from the regional tax office whereby they were asked for additional tax due on the purchase or sale of their properties.

These letters are currently called “complementarias” and given the increasing number of cases we are receiving, it has become more and more important to explain what these letters are and also to advise clients in order to take some preventive measures.

The concept is easy to explain: under Spanish law, the tax office has got the capacity to override the declared values of transactions in order to ask for additional tax on the basis that the declared price was “under the market value”.

Hence, a gentleman typically purchases a property in any place for 120.000 € and pays the corresponding tax, and one year later he receives a letter explaining with difficult legal language that under the regional tax office’s criteria, the value of the property should have been higher (180,000 €) and therefore he is liable for tax on the outstanding 60.000 €.

The same can happen when the client sells the property and the tax office asks for additional capital gains tax on the basis that the property was sold “too cheap”.

The first problem we find is usually that the deadlines to react have expired since the concerned purchaser/vendor has not appointed any address for official notification purposes. In such cases, the tax office tries to send the notification to the property – where no one lives except on holidays – and if the notification fails there, then they send it to the official gazette, which no one reads.

If this happens, the deadlines for appeals etc expire one month after the notification is published in the official gazette, and then there is hardly any chance to attack the tax office’s tax claim.

For this reason, the first advise we give to our clients is to appoint our law firm as the official address for notification purposes, so that the notification is timely received and they are not caught by surprise.

As to the possibilities to react, it depends as each tax claim is shaped differently and there are many valuation systems which the tax office can use to support their claim. The most typical are perhaps the statistics of property purchase, the estimation on the basis of cadastral values and also the valuations which are attached the the mortgage deeds.

Out of the mentioned valuation systems, the most difficult to attack is the estimation on the basis of cadastral values, since these are considered official and therefore widely accepted values.

Concerning the preventive measures, it is important to take photos of the property as it is upon the purchase and to keep copies of all the reform works invoices, in order to dispute the tax office’s claim on the basis that the property was not in good shape as you purchased. In addition, any report made by a professional as to defects in the property upon the purchase might be essential.

Finally, “legal” defects can also be alleged (we have even had the experience of the tax office’s claiming further tax on an illegal pool/house).

Concerning the legal options when the letter is received, it is possible to attack the tax claims on the basis of lack of formalities through several appeals (called “recurso de reposición” and “reclamación económico administrativa”), and also through a contradictory valuation system where you appoint a surveyor, the tax office another, and if they disagree in their conclusions a third one is appointed in order to issue a definitive valuation.

We have experience that the appeals are particularly effective when the tax claim is based on the statistics of property purchase. However, when the tax office supports the claim on the mortgage surveyor’s report or on the estimation on the basis of cadastral values, then the most effective option is the contradictory valuation system. On this point, we feel that clients are usually reticent to take this option as in most of the cases, the client has to pay two reports: his and the third technician’s. For this reason, we recommend considering this option only when the tax office claims over 1200 €.

If the appeals and the contradictory valuation system fail, then the only available options are to pay (sometimes on instalments) or to appeal at court.