Crackdown by the Taxman – the ‘Catastrazo’ is underway.

There have been numerous reports in the Spanish press in recent weeks suggesting the that Spanish tax authorities, or the Ministerio de Hacienda, are extending their pursuit of those people who have not properly declared changes to their properties. Of course, this situation is not unusual in Spain and there are estimated to be hundreds of thousands, if not millions, of properties that are incorrectly registered. Many of these are located in the Costa Blanca region.

For decades many local Town Halls (the Ayuntamientos) have  ‘turned a blind eye’, but in the current economic climate the central government has decided to instigate a more rigorous assessment of the situation. In the first instance they are using aerial photographs to look for discrepancies in the Catastral documentation (Land Registry) – reports suggest that helicopters have been employed  to cover rural areas. So what are they searching for?  Any building work to a property requires a formal building licence  – extensions, conversions, the addition of swimming pools, terraces, permanent outbuildings, garages etc. – and many have been carried out without following the correct procedures. Even those owners who have done so by obtaining building licences from the Town Hall would often not realise that they should also have advised the Catastro office, because any such alterations affect the catastral value of the property. This value is used to calculate the impuesto sobre bienes inmuebles (IBI). This is an annual  tax which is paid by the owner of a property based on the  catsatral value of the property. The total sum paid each year to the government is in excess of 10 billion Euros – many  of the changes that have been carried out by Spanish property owners should have led to a proportional increase in this tax revenue. However, until  now the planning departments in the Local Town Halls have not comunicated  with the central government Catastro office, so even if building licences have been obtained, the Catastro office would not have known and the Catastro value would not have been updated.

This situation is all set to change and the government are said to be reviewing millions of properties. Affected owners are currently receiving letters from the Tax authorities advising them that their property is under investigation. In those cases where discrepancies are proven, the owners are likely to be receive a substantial fine in addition to having to pay to update the legal documentation in the Catastro (and/or to legalize the property or extension if this is possible).

So how does this affect property purchasers? Many properties, particularly older examples, but also those that have been built in recent years have been extended or modified. Often it can be difficult for lawyers to identify such changes when checking the legal documentation. In the first instance they do not usually visit the property during the process of a sale and even if they were to do so, they often do not have the technical knowledge to readily identify alterations.

A property survey carried out by an RICS Chartered Surveyor is an economical and efficient way to minimize the risks when considering a property purchase in Spain. The technical inspection and report is complementary to the legal due diligence exercise that would be carried out by your Legal Adviser. Apart from identifying defects in the property, the physical inspections and surveys carried out by Marow Chartered Surveyors can help to identify legal discrepancies such as anomolies or ommissions in the Catastro registration or in the Escritura (Title Deeds). This can then be communicated to the Legal Adviser who can address the situation on your behalf.

Don’t get caught out when purchasing a property in Spain. The current ‘Catastrazo’, as it is being dubbed in the Spanish press, need not be a catastrophe for wary buyers.

Perhaps now, more than ever, it makes commercial sense to employ an RICS Chartered Surveyor when purchasing property in Spain.

MAROW Chartered Surveyors. Property. People.


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