Complementary Tax Spain: Do Your Calculations. Don’t Get Caught Out!


Too many people are not aware of the extent of complementary tax in Spain and the fact that it may be years until you are faced with the bill and even a fine for late payment.

Buying Spanish property or even land can be more expensive than you originally budget for.

Imagine this:

You walk into a shop and decide to buy a pair of shoes for the selling price of 30,00€.

VAT is payable at the rate of 20%

You pay 36,00€ (ie 30,00€ cost plus 6,00€ VAT) and you walk out of the shop with a nice, new pair of shoes and a price you were happy to pay.

And now, imagine this:

You walk into a shop and decide to buy a pair of shoes for the selling price of 30,00€.

VAT is payable at the rate of 10%

However, the “powers that be” decide that the shoes are actually worth 40,00€ and so VAT payable is actually 8,00€.

After some thought, even though, in principle, you do not agree with paying VAT on a hypothetical value, you decide to pay €38,00 (ie 30,00€ cost plus 8,00€ VAT)  for the shoes.

However, as you are paying for the shoes, a “higher power that be” informs you that they believe the shoes are worth 50,00€.

As a result, you end up paying €40,00 (ie 30,00€ cost plus 10,00€ VAT)  for the pair of shoes you originally decided to pay €30,00 for.

How crazy does this sound?

Unfortunately, this is not as crazy as it sounds. This is a simplified explanation of complementary tax in Spain.

This is what can happen when you decide to purchase property in Spain. This is why using a reliable property finder and well-informed property lawyer is essential.

So, how is complementary tax in Spain calculated?

Complementary tax in Spain is applied to the difference between the declared purchase value and what the tax office calculate that the value of the property should have been. This “value” is what is considered to be the ‘minimum market value’ of the property. A number of standard formulas, information from records and published regulations are used to calculate this.

Complementary tax in Spain is charged at the same percentage as Spanish transfer tax.

WARNING: It may take up to four years after your property purchase for this bill to arrive.

Let’s look at an example:

Complementary Tax in Spain

So, how can you avoid this surprise tax bill?

A good property lawyer will advise you of the fiscal value of a property and the expected transfer tax to be paid, in order to avoid complementary tax,  before signing the sales contract. It is your decision as to whether you pay the “extra” tax in order to avoid any further tax bills when you sign the property deeds at the notary.

Your lawyer may be able to contest the valuation, highlighting any factual errors. However, you must act on this as soon as the tax bill is received.

Be warned that, should the complementary tax bill arrive a few years after the property purchase date, you will be charged for late payment. You can expect to pay around 5% of complementary tax per year.

And now for the final warning, from recent personal experience …

Having recently purchased a plot of land, at approximately 30% below the fiscal value, we opted to pay the tax on the fiscal value of the land, in order to avoid the complementary tax.

But, guess what?

The Junta de Andalucia have now decided the land is worth even more than the “fiscal value” declared by Mijas town hall. In fact, they claim it is worth 33% more than what the town hall say. That is 70% more than we paid for it …

Are they having a laugh? Let’s see. Our lawyers are on the case!