Tax Abuses from the Tax Office

Complementarias from the tax office and how to deal with them

Complementarias (also know as “paralelas”) are those letters that the tax office sends innocent tax payers who have typically purchased a property, explaining that according to her calculations, the value of the property is higher than the one declared in the deeds and therefore the purchaser is obliged to pay a higher tax fee.

Even though most people think of them as a “fine”, they are not supposed to penalize tax payers for their bad behaviour. The Spanish tax laws lay down that the tax is levied on the “actual value” of the operation, and such value is identified in many cases with the market price. Consequently, the aim of the complementarias is to protect the tax man’s interests, enabling the rectification of the prices and subsequently allowing the rectification of the tax fees when the declared prices are below the market price. For instance, in the event I purchased a house and I declared a price of 1 € on the deeds, paying a tax of 7% on 1%, it is crystal clear that the transaction has been undervalued. Consequently, the tax office would surely react by sending a complementaria stating that according to their calculations the right price for the property amounts to 10.000 € and therefore I still have to pay 7% on 9.999 €, plus interests since the transaction took place.

In order to check the values of transactions, the tax office has got a wide range of options at her disposal: a complementaria can be issued on the basis of price averages and statistics collected by the tax office, of valuation reports drafted by qualified technicians, of updated catastral values, or even of fixed tables of values. In some cases, the tax office simply takes as reference the value of the property according to the surveyor’s report when the property is going to be mortgaged.

In many cases, the tax office sends those letters and the amount of tax requested is so low that many find it easier to pay the requested amount without further thoughts. However, when the tax fee is high, the situation forces the tax payer to look for extraordinary remedies. At this point, there are several tips which most would find useful:

- firstly, do not waste time and get in touch with a solicitor with experience in these issues. You should take into account that the tax office gives you a 10 days time to submit allegations, and if you miss that opportunity, then things become more difficult because you have missed the chance to criticize the reasoning of the tax office; it is also important that you bring along a copy of your deeds and a copy of the tax registry information, as the more information you can supply, the better.

- secondly, in many cases the tax office estimates the value of properties without knowing the actual circumstances of such premises, automatically presuming they are all right or that they are brand new. Consequently, proof of the actual situation (how old it is, need to repair the roof, etc) might be relevant in order to fight the tax man’s estimation.

If the tax office realizes that there is a clear mistake, then they would usually update the initial estimation according to the details you supply in your allegations. If they insist in their initial decision, then it is necessary to consider either the appeal (“recurso económico-administrativo”) or the alternative valuation process. The former is the correct way if the tax office has not made the estimation according to law, and the second aims at proving that the market value is not the one suggested by the tax office. In both cases, it is possible to apply for the payment of the debt to be postponed until the process finishes. Finally, if all the above fails, then it is necessary to go to court.

Please call us or make an appointment to discuss the process with one of our lawyers.