The Spanish Tax Agency has introduced stringent measures to crack down on property sales below market value, with fines reaching up to €100,000.
These new regulations are aimed at curbing tax evasion practices. Particularly in cases where homeowners sell properties to relatives at significantly reduced prices to avoid hefty inheritance or gift taxes.
While most property owners aim to sell their homes at the highest possible price, some opt to sell at symbolic prices to family members, disguising the transaction as a sale rather than a gift. This practice has come under the scrutiny of the AEAT. The tax authority has now set strict price limits to prevent such fraudulent activities.
Tax agency targets underpriced property sales
According to a report by the real estate portal Idealista, the AEAT will investigate property transactions where the sale price falls significantly below the market value. If a property is sold at a price deemed too low, the transaction may be subject to investigation by the Economic and Financial Crimes Unit.
The AEAT has established clear guidelines to determine when a sale price is too low. Property owners who sell their homes for less than 90% of their market value will face penalties, depending on the extent of the underpricing:
- Minor infringement: If the sale price is between 90% and 95% of the market value, it is considered a minor infringement. This could result in fines ranging from €1,000 to €10,000.
- Serious infringement: If the sale price is less than 95% of the market value, it is classified as a serious infringement. In these cases, fines can escalate to between €20,000 and €100,000, with the possibility of prison sentences ranging from six months to two years.
For example, if a property with a market value of €100,000 is sold for less than €90,000, the seller could face a fine of up to €10,000. Should the sale price drop below €50,000, the penalties become even more severe, with fines up to €100,000 and potential imprisonment.
Legal Risks
In addition to facing fines, property sellers are required to report any capital gains or losses from the sale in their annual tax return. Failure to do so could result in further penalties and legal repercussions.
The AEAT’s crackdown on underpriced property sales is part of a broader effort to combat tax evasion and ensure fair taxation in property transactions. Property owners are advised to be fully aware of market values and to seek professional advice before setting a sale price, to avoid falling foul of these stringent new regulations.