British expats face shock taxes on homes in Spain

Demands rise for retrospective Stamp Duty

Majorca Valldemossa typical village with flower pots in facades at Spain

British owners of homes in Spain may be hit with retrospective tax bills if the authorities decide they paid too little for their property.

The Spanish government is re-examining the sale of tens of thousands of homes that have taken place over the last four years, according to the Daily Mail.

The Impuesto de Transmisiones Patrimoniales (ITP) is Spain's equivalent of Stamp Duty, and applies only to the resale of houses: new-builds are exempt. It amounts to a percentage of the value of the house, which from region to region but averages around eight percent.

Now, though, the tax authorities are suspicious that some properties may deliberately have been sold at less than the going rate - and plan to recoup the tax they believe they have missed.

Bob and Kay Rogers, for example, told the Mail that they have been ordered to hand over an extra £1,500 in tax, three years after buying a home in Miramar, near Valencia. They paid €83,000, or around £65,300, and handed over ITP of seven percent, amounting to £4,571, to the taxman.

However, last autumn they were shocked to receive a letter from the local government of Valencia which told them that the house was in fact worth £81,627 - and demanding an extra £1,100 in ITP. The couple have disputed the bill, which has now attracted an extra interest charge of £400, but have been told they must pay up.

Such re-examinations aren't new, although the authorities appear to have stepped up the number over the last six months. Property owners do have a right of appeal, and have in the past been successful. But they need to act quickly - which can be a problem for second-home owners, who may miss the letter asking them to pay up.

House prices in Spain, particularly in those areas popular with expats, have plunged since the beginning of the financial crisis in 2008.

But it now appears that prices may have bottomed out, with the latest figures from the Property Registrars showing a 1.15% rise during the third quarter of last year. As a result, buyers are starting to return.

And they should take account of the possibility of an extra tax bill in their plans, says conveyancing firm Abaco Advisers.

"It might feel unfair but it is simply a tax that you should be aware of if you are buying a property in Spain, particularly if the property you are buying is significantly reduced in price," warns the firm.

"Remember, you have already saved money on this property and should build the possibility of paying the tax into your calculations. If it isn't levied you will have money to spare and if it is, it won't come as a surprise or find you indisposed to pay it."

Least affordable places to live

Least affordable places to live

Read more on AOL Money:

Dream Spanish villa demolished after Brits are scammed

Property crash leaves Brits stranded in Spain or thousands poorer

Buy an entire Spanish village for £50,000

British Expats Furious Over Cyprus Bank Accounts Levy