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Tax Demands sent by the Valencia Tax Authority likely Illegal

Many property purchasers (and also beneficiaries under Wills or those who have been gifted property) in the Valencia Region received a “supplementary tax demand” for the stamp duty (Impuesto de Transmisiones Patrimoniales) or the inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones).

This tax demand has been issued by the tax authority in the Valencia Region (Conselleria de Hacienda): they have been considering and reviewing the valuations of acquired, inherited or gifted properties, and have arrived at a higher value than the actual price referred to in the Notary deeds. As a consequence of this new valuation, the Tax Authority calculates the amount of tax to be paid, which is higher than the amount previously paid; and they claim for the difference –plus interests- against the new owner.

The referred to valuation adjustments that the Tax Authority has been making were carried-out under the authority conferred by article 57.1.b) of the “Ley General Tributaria” legislation and the Regulation: ORDEN 23/2013, issued by the  Tax Authority. Those legal texts refer to the right of the Administration to review valuations just by referring to the valuations (a certain price per square metre) previously published in official registries for tax purposes, applicable to all the properties in a determined area. 

Supreme Court Ruling

But legal circumstances have recently changed in regard to these issues as a consequence of the Judgment issued on the 28th of October 2015 by the Supreme Court in Valencian Region  – the Tribunal Superior de Justicia de la Comunidad Valenciana (TSJCV)-. This Court has determined that the direct reference to “official prices” is acceptable in certain cases -for example, local taxes known as “IBI” or “Plusvalía”-, but not for other taxes, like stamp duty (Impuesto de Transmisiones Patrimoniales) or inheritance and gift taxes (Impuesto sobre Sucesiones y Donaciones). According to the Supreme Court Judgment, the Laws applicable to these taxes require the valuation adjustments made by the tax authority to be personalised and individualized. Accordingly, any valuation reviews that were carried-out making reference only to the “official prices” were deemed to be against the Law and, therefore, invalid.

This new situation opens the door for appeals by hundreds of property purchasers (or indeed beneficiaries under Wills, or those receiving a gift of property in the Valencia region) who have received notifications of tax demands relating to the these taxes. Therefore, we highly recommend to appeal against those tax demands. If the  Tax Authority refuses a first appeal, we will have the opportunity to appeal again, through an “administrative” Court called the Tribunal Económico-Administrativo and, if necessary, through the mentioned Supreme Court, which is the highest judicial authority in the region and has already clearly determined this issue.

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