The valuation (tasación) your bank makes when you apply for a mortgage has a significant effect on your Gran Canaria property purchase.
- If it’s too low, you don’t get the mortgage or have to provide more capital.
- If it’s too high, it can cost you a fortune in extra tax payments.
The tax implications of buying a bargain Gran Canaria property
In my article Bargain Gran Canaria Property: Got A Big Tax Bill, I wrote about how the Spanish tax authorities (Hacienda) often demand extra tax if they think you got a good deal. It stops people from paying for a percentage of their property in under-the-table cash.
The Tax authorities are meant to use an official formula for calculating how much extra tax you owe. However, often they just use the valuation made by the bank when you get a mortgage. Legal precedent in Spain has established that the taxman has the right to do this.
For example, if you buy a house in Gran Canaria for €230,000 but the tasación comes out at €330,000, Hacienda asks for 6.5% of the difference in Impuesto de Transmisiones Patrimoniales (ITP) tax. It can ask for this extra tax payment up to four years after the purchase date (and often does wait until the last minute and add four years of interest).
Avoid this unwelcome surprise by challenging a bank valuation that is significantly higher than the price you are paying for your property.
A good estate agent will be able to argue your case with your bank’s tasador and make sure you get an accurate valuation that doesn’t attract the taxman’s attention.
I’m Laura and I’m one of Gran Canaria’s best-selling estate agents. If you plan to sell or buy a Gran Canaria property and want quality personal service, please get in touch for a free consultation.