IPT: What it is, where to Process it at the Tax Agency, and where to Claim It

7 de April de 2021

If you buy a second-hand house, the administration could require you to pay more for the Property Transfer Tax, known as ITP. Today we explain what you can do to avoid paying more for the purchase of your home.

Contenido

1 What is the Property Transfer Tax?
2 Sometimes the Tax Agency demands more money
3 Why does the Tax Agency consider that your house is worth more?
4 What Legal Procedures Can You Carry Out
5 How to Make the ITP Claim
6 The seller can also be affected

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What is the Property Transfer Tax?

Its full name is Property Transfer Tax and Documented Legal Acts, although it is best known by its acronym ITP. It is a tax that we will have to pay in the case of property transfers (such as a home), company operations, and documented legal acts.

In the case that affects us, it is a tax that must be paid when buying a second-hand home or when renting. It also taxes the public deed of sale of the home or the deed of a mortgage, for example.

It is the person who buys the house or rents who is obliged to pay it, and the amount must be settled at the Tax Agency of the community where the property is located within a maximum period of 30 days from the purchase.

Here we explain all the expenses you will have when buying or selling a second-hand house.

Sometimes the Tax Agency demands more money

What happens is that sometimes the Tax Agency demands that you pay a higher amount than corresponds for the house we have bought. This is known as a supplementary settlement for verification of values. In addition, another amount is usually added as default interest, as it is understood that you did not pay what you should have paid within the corresponding deadlines.

This can happen if you buy a home at a very low price. If the Tax Agency of your community interprets that the house is actually worth more than you have paid for it, they could demand more tax from you.

Although what most people do when this happens is to pay the difference in tax to avoid litigation and major problems, the truth is that there are legal formulas to at least try to get it dismissed.

As it is an extra tax that is demanded from us, it could be the case that it is an unfair tax. The reason is that in reality what the Tax Agency does is value the home that has been bought above the value for which it is registered. This valuation could be subjective or arbitrary with the aim of raising more money in this tax.

These are the reasons on which a claim can be based to try to avoid being charged that additional difference in tax.

Why does the Tax Agency consider that your house is worth more?

If this situation occurs, it is because the Tax Agencies of the autonomous communities value housing prices that perhaps are not adequate for the market price. They value the value of a house according to the General Tax Law, which establishes seven methods to calculate the value of the house.

These methods are based on scales that may not be well adapted to the real situation of the market, which is usually more changing. At present, for example, the price of housing has fallen somewhat due to the pandemic situation, and local tax authorities are not taking into account these price drops, which are more specific and circumstantial.

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What Legal Procedures Can You Carry Out

If you consider that the additional cost of the Property Transfer Tax that you have been forced to pay is unfair, you can try to claim it. There are two main ways:

Promote a Contradictory Expert Appraisal (TPC)
Appeal the tax assessment.

In the first case, what is done is to request an appraisal by a team of experts to clarify the real value of the home.

In the second case, what is done is to directly appeal the assessment. It is the form of appeal that is working best in the courts. Many of these claims are being accepted, annulling the “extra cost” that the ITP assessment entails.

On the other hand, requesting the Expert Appraisal usually results in a reduction of said assessment, but not its total annulment.

How to Make the ITP Claim

In the event that we receive this supplementary assessment of the Property Transfer Tax, it is important that you know that you have one month to file the corresponding appeal and try to have it annulled.

This is done by filing an economic-administrative claim against the assessment that has been imposed on you. It will be the TEAR (Regional Economic-Administrative Tribunal) that resolves the appeal and, therefore, this is the appeal to which you will have to send your claim.

Once the claim has been filed, you will not have to pay the amount of the tax assessment (the extra payment that the Tax Agency demands from you) until the appeal is resolved.

In the event that the TEAR dismisses your request to annul the extra assessment, you will have another second chance by presenting a contentious-administrative appeal in the Superior Court of Justice of the corresponding autonomous community. In this second step, you will be able to accompany documentation that proves the value of the house according to the purchase price, such as an appraisal as an expert report from a party.

The seller can also be affected

This situation in which local tax authorities consider that a house has been sold for less money than it actually costs can also affect the seller.

Although not through the Property Transfer Tax since, as has already been explained before, it corresponds to the buyer. But in the form of Personal Income Tax.

Since Personal Income Tax is paid on the capital gain when selling a house, it is normal for the Tax Agency to consider that if that house is worth more than the sale price, it is because you have earned more money. In short, it considers that the seller has received more money than what has been registered.

This can also lead to the beginning of a litigation between the seller and the regional tax authority when considering that the payment of the increase in Personal Income Tax is unfair and abusive.