“LIQUIDACION COMPLEMENTARIA” AFTER PURCHASING A PROPERTY IN CANARY ISLANDS

After buying a property you have to pay, normally, Transfer Tax (Impuesto de Transmisiones Patrimoniales). In some cases you are exempted of this tax, i.e.: because the one applicable is IGIC (Canary VAT). The Transfer Tax is “self-liquidated” and paid within 30 days from the date of the signature of the Purchase Deed by means of a “autoliquidación” (self-liquidation) application form. The tax is paid at the Oficina Tributaria that belongs to the Canary Government. The applicable rate to this tax is 6.5% of the price.

I am not referring now to this payment. Instead I am going to talk about the problem that comes later when the Tax Authority review the value assessed at the Deed thorough a valuation and says that the “real” price is higher than the price “assessed” at the Title Deed. This act is call “comprobación de valores” (verification of value). Consequently, according to the Tax Office the rate should have been applied on the highest price.

In other words, the Tax Office reassess the value on the property and ask for the payment of the difference between 6.5% on the real price and 6.5% on the assessed price. For example, the price assessed at the Public Title Deed is 50,000 and you paid 6.5% (self-liquidation) on this price which is 3,250. The Tax Office sends a verification of valuation saying that the real price is 70,000 (instead of 50,000) and liquidates the 6.5% on this price which is 4,550. Consequently, as you have paid 3,250 you have now to pay extra 1,300 up to 4,550. The liquidation includes fines and interests which, at the end means that you are paying a proportionally a substantial sum.

At the beginning you normally receive a proposal and you have the opportunity to do allegations. After allegations the authority takes a decision which is normally the Further Liquidation that put and end to the administrative proceeding.

WHAT CAN WE DO?

1) accept the liquidation and pay

2) object the liquidation because you do not agree with the valuation made by the Authority or the liquidation was wrongly made.

1) ACCEPT THE LIQUIDATION: Either because you agree with it or the new liquidation figures are not so high and you consider the appeal is not worth suing.

2) DO NOT ACCEPT THE LIQUIDATION: Object the valuation. There is a proceeding that lets you ask for a “contradictory valuation” in which you suggest a valuation lower than the one made by the Tax Office. If you consider that the liquidation of the authority has not been properly made you can also present a “Recurso de Reposición” (revision of decision by the same authority) or “Reclamación Economico Administrativa” (revision of decision by a higher authority).

A) VERIFICATION OF VALUE: in this proceeding you appoint and independent surveyor that makes a valuation of the property lower than the authority.

B) RECURSO: The “Recurso de Reposición” is presented before the same organ that valued the property and issued the new liquidation. The target of this “recurso de reposición” is to object the liquidation and makes the authority to changes its mind and revoke the liquidation. It is very difficult to make the same authority that issued the act to revoke it.

C) RECLAMACIÓN: The “Reclamación Económico Administrativa” is presented before “Tribunal Economico Administrativo” who is a higher authority (and depends on the Ministry of Economy). This “reclamación” can be presented after the decision taken in “recurso de reposición”. In any case, you can go direct to “reclamación” without previous “reposición”. You are not allowed to present both appeals (“reposicion” and “reclamacion”) at the same time.

In any of both cases the liquidation must be guaranteed or paid meanwhile the “recurso” or “reclamación” have no decision. If you do not pay or guarantee the authority can enforce the payment by means of “embargos” (attachments) on your assets. The way to guarantee such payment is through “bank guarantee” or “payment”. If no guarantee the Tax Office may attach our assets. If the liquidation is revoked the Tax Office would refund the monies.

If you do not success with “Reclamación Economico Administrativa” the next step is to go present a “Recurso Contencioso-Administrativo” before the Administrative Court. In this case, those Courts belong to the Judicial Power and, consequently, do not depend on the Ministry of Economy (Executive Power).

It is very important to bear in mind that this article does not replace any legal advice. This is just a summary of complex matter impossible to explain in few lines. In any case, we have a high percentage of outcome (near 100%) in Economic Administrative Claims in whose cases the said Court revoked the “Complementarias”. What I do recommend is not to ignore such notifications and take the proper decision (legal advice).

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