Spanish property can be a trap for investors, warns estate agents |
|
|
Published
:
Fri, 14 Oct 2005 11:05
|
LONDON: British buyers of Spanish homes, beware! There are tax hitches that can lead to loss of money. It is normal, warn British estate agents, for the Spaniards to underquote property prices to avoid higher tax payments, but this can lead a foreign buyer into a lot of legal wrangling and the property bought could prove to be a bad bargain.
According to the National Association of Estate Agents (NAEA), the value of a home can be well below its market value, to ensure payment of lesser taxes. But, when the local authority or a developer wants to buy the land, the second buyer will find it difficult to prove how much he had paid for it.
NAEA's Ian Tonge, who heads the organisation's international working group, said Spanish people have been reluctant to put in the full price on their documents because that would force them to pay more tax than the gain they had made on the property. But, when their property is needed, say for road widening purposes, the buyers will only receive the government’s recorded value on it. Therefore, warns Tonge, land buyers in Spain should ensure that they declare the true value of the property.
There is a particular law in the country, called the Valencia land grab law of 1994, which allows developers to compulsorily purchase land from property owners at prices often below market value. At present, this legislation is applicable to the state of Valencia, but other Spanish regions are apparently considering enactments of similar nature. Several British owners of second homes in Valencia state have lost money as a result.
As it has become a EU constituent, Spain has been reviewing the tax laws. But, it will be prudent for British citizens planning to invest in properties in Spain to be careful to declare the full and accurate price they have paid in the documents, says NAEA.
The British investors who had lost money in Valencia are now pursuing a case in the European Court of Human Rights through law firm Irwin Mitchell.
|
|
|
|
Print this Story
Irish housewife wins record lottery 