Many homeowners occasionally ‘forget about’ the taxes that affect property and the existing local authority, autonomous and State controls.

1. When you buy a property, the Public Notary must draw up a public purchase deed. The Notary is obliged to inform the tax authorities of all property sales and purchases that are carried out each day. When such a purchase or sale takes place there is proof as to what person or Company is buying and what person or Company is selling. The Tax Inspectors are at full liberty to know the notarial operations that are carried out in all the Notary offices in Spain.

2. The purchaser must pay what is known as the ‘Impuesto sobre transmisiones patrimoniales’ (Purchase Tax), therefore this payment for a particular property to a autonomous community, will remain registered.

3. The seller must declare the sale in his annual tax returns. If the vendor is a non resident then the purchaser must retain 10% of the sale value and pay it to the Tax Authorities within 30 days of the transaction. In this document the identity of the buyer and seller are also very clear. Apart from this the seller must declare the profit made by the sale. Some foreign persons do not do this. There is more and more exchange of information between the countries of the European Union with regard to taxes; therefore the Spanish Tax Authorities are able to contact counterparts in England, Germany, etc.

4. Every year property owners must declare all real estate belonging to them in their tax returns whether they be either resident or non resident. Property which belongs to a Company must also be declared.

5. If a property is rented the Spanish Tax Authorities must be informed. It is not difficult for Tax Inspectors to know if a property is being let due to the consumption of water and electricity.

6. The Town Halls also control properties which are in their area. Homeowners must pay the municipal taxes which are known as ‘Impuesto sobre Bienes Inmuebles’ or IBI for short and the municipal taxes for rubbish collection.

7. Companies that own property are also liable for taxes. If the shareholders use the property then it is understood that the Company will receive rent, according to the market price, which must be declared every year.

8. Autonomous authorities are finalizing a new control over properties which is even stricter. A special land registry exists, called a ‘catastro’, which has a control over all the properties of the region. Apart from this the autonomous communities are involved in a project of aerial photos, which via Internet they will be able to know what is the market price of a property. The reason for this being that on many occasions property is either bought or sold for a price which is not realistic. The Tax Authorities are aware that a high percentage of property is not really bought or sold at the declared price in the Notary’s office but for much more. In the past dispute have arisen because land registries and the Tax Authorities, who have technicians and architects that value property at a just price, send letters to both parties (buyer and seller), explaining that the amount that has been declared is not realistic and has been made up in order to avoid paying taxes.

To conclude, although many foreign people believe that their property is not correctly controlled by the Spanish authorities they should be aware of the repercussions of not doing things correctly. Fifteen years ago the situation was more primitive with regard to the Spanish tax authorities due to a shortage of technical means. Inspection services have since evolved a great deal with advances in technology so that nowadays it is easier to exercise control with the help of computers, internet and the greater coordination between European countries to fight against fraud and tax evasion. Apart from this the Spanish Tax Authorities claim to be one of the most advanced of the European Union.