La Complementaria or ‘Bargain Hunter Tax’

Raymundo Larraín Nesbitt, May, 8. 2015

If after buying property you receive a letter from the Tax Office demanding payment of extra tax under the heading ‘Propuesta de Valoración y de Liquidación Provisionalyou have received what is known as a ‘complementaria’. Regular legal-contributor Raymundo Larraín Nesbitt explains how to avoid one, and how to appeal if you have already received it. You only have 10 days to appeal it.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
8th of May 2015



Spain’s unending appeal continues to attract buyers from all over the world. 2015 consolidates last year’s trend as a buyer’s market. Besides the traditional reasons to buy property in Spain, bargain hunters are smartly taking advantage of three one-time goldies:

  • Rock-bottom prices; on average 50% depreciation across the board after a prolonged eight-year property slump.
  • Historical ultra-low interest rates; the lowest on record on a fifty-year period due to the ECB’s Quantitative Easing monetary policy that’s shelling 60 billion euros a month in the money markets.
  • Sterling pound on a seven-year high against the euro. A strong currency empowers pound-holders to buy overseas at intrinsic ‘discounts’.


It is doubtful we will witness again such a propitious combination to buy real estate in Spain for the remainder of our lifetime.

British buyers in particular are in for a treat. Osborne’s bold pension reform allows unprecedented freedom to citizens (over the age of 55) to cash in on their pension pots as a lump sum, tax-free (only for the first quarter; income tax at marginal rates still applies on the remaining three-quarters).

For all these reasons buyers are flocking to Spain again to buy property at cracking prices. You can read the full list of taxes and associated buying costs in my article Taxes on Buying Spanish Property.

But it’s not all rosy for bargain hunters on the prowl as I explain below.

La Complementaria – Definition

Is a supplementary tax the Spanish Tax Office levies on buying property as a result of today’s low real estate values.

Knockdown prices are unwittingly drawing the attention of the Tax Office. So much so that over the last years many buyers have received a letter from Spain’s Inland Revenue normally one year after completion (at times even longer) demanding supplementary tax is paid plus delay interests on the property on having (allegedly) ‘underpaid’ ITP or Property Transfer Tax. This is known as “liquidación complementaria por comprobación de valores” in Spanish legal jargon or simply “la complementaria”.

La Complementaria – Root Cause

The spike in complementarias we are witnessing as a sign of the times does not relate to buyers under-declaring (to pay in ‘B-money’), rather it is the disjointedness between the Tax Office’s outdated valuations and today’s low property prices as a result of a prolonged eight-year property slump.

This can be explained because Regional Tax Authorities use standard value tables (bases de comprobación de valores) to determine the valuation of properties; each property has assigned a fiscal value in Hacienda’s books. Property Transfer Tax is a devolved competency and Spain’s seventeen Autonomous Communities, following article 46 of the Property Transfer Tax Law (ITPAJD), are empowered to review the declared sales price recorded in the Title deed before a Notary Public. Regional Tax Offices draw a comparison between the fiscal value of the property and the declared sales price at completion. Any meaningful deviation is taxed.

These rateable values are static and are reviewed from time to time (every decade on average). This was fine so long as there was a continuous capital appreciation but when the market grinded to a halt eight years ago these tables froze in time and do not reflect accurately in most cases the overall 50% depreciation real estate assets have undergone (speaking in broad terms). So basically these rateable values the tax authorities zealously use are, at best, outdated showing in most cases top-of-the-range pre-crash valuations which are logically not in line with today’s low market values. That is why bargain hunters are receiving these letters.

If the Tax Authority detects a statistical meaningful deviation they will exact the difference in what they deemed a buyer has under-declared. In most instances this is simply not the case. Buyers have only shrewdly taken advantage of the opportunities a crashed real estate market has to offer. Albeit unbeknownst to them this draws the attention of Regional Tax Authorities which will do their best to recoup what they (wrongly) see as an under-declared sales price.

Take note that the complementaria I describe is the exclusive making of the 17 Regional Tax Offices as a result of devolved competencies; Spain’s Hacienda in Madrid (AEAT) or Centralised Tax Office abhors of this regional practice and is unrelated. And if anyone is wondering why this foul practice is done it’s because money is tight and some regions are cash-strapped. When the market picks up again it will cease to exist.

It is explained more clearly with an example:

A two-bedroom property overlooking an 18-hole golf course that used to fetch €200,000 is now selling at a bargain price of €100,000. A couple seize the opportunity and buy it signing at a Notary Public. One year later they receive from their local Tax Office a letter titled Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados (Property Transfer Tax) under the heading Propuesta de Liquidación (Payment Proposal). The letter goes on to explain that the value of the property, according to the Tax Office’s books, is €150,000. The Tax Office believes the couple have under-declared the shortfall of €50,000 and so demands the tax on the difference plus delay interests.

You can read further on this widespread phenomenon in the article: As house prices crash the “bargain hunter” tax becomes an issue for buyers.

Complementarias – The Positive Side

I may be alone on this, but I believe the perception on them ought to change as they are not intrinsically negative; and of course they can be challenged as I explain in the section below.

I find complementarias useful for the following two reasons:

  • From an individual perspective: the fact you have received one is a cast-iron guarantee you have purchased at a bargain price.
  • From a broader market perspective: they can be used as an investment indicator to pick up on an undervalued property market.


No one likes to be slapped with extra taxes – granted – but on the bright side you would not be receiving this letter if the taxman did not think you had bagged yourself a great bargain. Moreover receiving one is a surefire tell-tale sign you have done well for yourself on buying a below the market value property (BMV).

Additionally a surge on complementarias bears the hallmark of a market’s trough – a clear sign to buy. Complementarias may be used as an investment indicator signalling an undervalued market; with overvalued real estate assets complementarias simply cannot exist, by definition. It is precisely because bargains abound in a buyer’s market that complementarias have soared over the previous two years. They did not exist in the heyday of the property bubble.

I had already warned profusely about the complementaria in my articles How to Buy Property in Spain Safely and Buying Resale Property in Spain. And just to clarify, so there are no misunderstandings, I am not advocating them in any manner whatsoever as it is blatant; merely pointing out two aspects which I find positive on digging further.

Challenging La Complementaria

There are two ways to tackle this problem:

  • The first one is to take pre-emptive action to mitigate the chances of it happening or negating it altogether.
  • The second involves appealing a proposed payment once received.


I. Pre-emptive Measures


A lawyer may request from the Tax Authorities the book value of the property (valoración previa vinculante). This is the value a lawyer knows that if sold below will necessarily draw the attention of the Tax Office by way of extra taxes. It binds the Regional Tax Office on calculating Property Transfer Tax (ITP) on resales and may be attached to the Title Deed on completion in avoidance of ‘discrepancies’.

The Tax Office calculates property taxes using the cadastral value (which is below the market’s value). The cadastral value appears on your annual IBI tax receipt (akin to the United Kingdom’s Council tax bands and rateable values).

A cadastral value is static and is revised from time to time (every ten years on average). The way it works, in the majority of Autonomous Communities, is that Tax Authorities apply a coefficient that is published annually in the Official Law Gazette of each Autonomous Community. This is called Coeficiente Multiplicador del Valor Catastral (or CMVC, for short). I won’t go into detail on how this coefficient is obtained. A vendor needs to multiply the cadastral value by the CMVC and this will give the updated ‘real’ cadastral value of the property for tax purposes. The CMVC is different for every municipality (town or city) and is updated from year to year. Unfortunately this procedure is not followed by every Autonomous Community in Spain as they have devolved competencies.

The buyer now knows that, on submitting the tax information for the sale, he must pay Transfer Tax on or above said updated real value. Only then is he ensured the Tax Office will not demand any additional tax (article 134 of Spain’s General Tax Law or LGT). This is the minimum market value for tax purposes.

Following on my above example, the two-bedroom property located in the municipality of Marbella has a cadastral value of €115,000. The coefficient to be applied is 1.31 for 2014. This gives a ‘real’ price of €150,650. Transfer Tax should be calculated on this figure to avoid attracting the Tax Office’s additional tax request despite the property being sold for €100,000; that is irrelevant and beside the point.

You can check for yourself the assessed valuation given by the Regional Tax Offices. Each Autonomous Community has different procedures in place; in some valuations can be requested online, whilst others require a written form is submitted. I will only list those where non-residents frequently buy, not the seventeen that exist:









II. Appealing the Payment Proposal


A buyer has two options on receiving a complementaria letter:

1. Passive. No lawyer is hired, no appeal is filed; proposed tax plus delay interests are paid lump sum.

2. Pro-active. Lawyer is hired and appeal is filed; revised (lower) tax is paid besides lawyer’s fees.

To file an appeal a lawyer may require the support of an external chartered surveyor (normally a technical arquitect known as aparejador) to draft a detailed report of the propertie’s value (tasación pericial contradictoria). The price for this report is in the region of €1,000. Hiring a lawyer to lodge an appeal is in the region of €1,500 to €2,500, dependent on the matter’s complexity.

So basically a buyer must run the Maths. Hiring a lawyer and a chartered surveyor has combined fixed fees in the region of €2,000 to €3,500. The combined fixed fees are the breaking point upon which a client starts to save money in taxes.

It stands to logic that if the Tax Office is demanding for example €1,000 as a Property Transfer Tax shortfall hiring a lawyer and a surveyor is out of the question. It’s put up or pay up, period.

Now if what’s being discussed exceeds the €2,000 to €3,500 threshold (as is normally the case) then it is reasonable to hire a lawyer (and surveyor) as their fees are offset with what a buyer stands to gain in saving themselves the supplementary tax (plus interests).

In practice these differences are larger and translate into much higher figures (as Regional Tax Offices takes their sweet time in sending these letters and meanwhile delay interests are accrued which are added on top and rolled over to what is owed by the taxpayer). A lawyer’s fixed fees are a bargain compared to what one stands to save in taxes. Particularly on buying high-end property lodging an appeal on a complementaria is a no-brainer. It is worth every penny in my professional experience.

Profile on the Appeals Procedure

If no pre-emptive action was taken, normally one year post-completion (but may take longer, years) the buyer, or his legal representative in Spain, will receive a Payment Proposal for Transfer Tax on the sales price shortfall. This payment proposal also includes delay interests for late payment on the lapsed time between completion and the day the letter is officially notified. The outline of the appeals procedure is as follows:

1. A buyer receives from their local Tax Office a letter titled Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados (Property Transfer Tax) under the heading Propuesta de Liquidación Provisional (provisional payment proposal). Example of a complementaria letter (source: El Confidencial).

2. He has 10 working days to register his interest upon the notification of the letter by recorded delivery. He can make allegations and submit documents to uphold his counter-arguments. Failure to comply within the ten-day window time-bars any option to file an appeal.

3. These allegations are normally dismissed and the Tax Office sends a liquidación tributaria definitiva (Final Payment Proposal).

4.  Two options fan out on filing an appeal:

a) Recurso de Reposición: It consists on filing an appeal before the very Tax Office (Agencia Tributaria) that drafted the letter so they ‘reconsider’ their calculations and decision. Needless to say the chances are slim to non-existent. This appeal is optional. One can first file this appeal and if it fails follow the TEAR appeal explained below. Deadline is 30 days.

b) Recurso Económico-Administrativo: This files an appeal before the regional economic administrative tribunal (Tribunal Económico Administrativo Regional, or TEAR) which is independent from the Tax Office; though slower usually ends in success. Appealing through TEARs is your best bet (pun not intended). Deadline is 30 days.

5. If the appeal succeeds, the revised (lower) Property Transfer Tax (ITP) is paid.

6. If the appeal fails the lawyer may opt to file legal proceedings before a Juzgado Contencioso-Administrativo (it normally doesn’t reach this stage).

Focus on the Recurso Económico-Administrativo

The lawyer in his appeal will hunt down formal errors made by the Administration on making their case. He will also make reference to ample jurisprudence on cadastral values to support his arguments as well as making good use of the surveyor’s report.

Regardless of the outcome, a client will not recoup the expenses incurred on hiring a lawyer and a chartered surveyor. The appeal procedure takes over a year.

La Complementaria or ‘Bargain-Hunter Tax’ – Conclusion

A market awash with bargains, coupled with the exceptional pro-buyer circumstances highlighted in this article’s introduction, fostered a U-turn in 2014 as I pointed out in my article Buying Property in Spain Safely. The remarkably favourable buying conditions, sustained by a mortgage lending rebound, translate into a sharp increase of bargain sales which account for a surge in complementarias over the previous two years which may, in due time, lead to a steady rise in property prices.

The spike in complementarias can be pinned to an undervalued market, a buyer’s market by definition, as opposed to London’s seller’s market which is eye-watering overvalued. The widespread phenomenon of complementarias was largely unheard of in the boom days and will foreseeably cease to exist in the near future when the market gathers pace and momentum gently drives prices upwards across the board.

In my experience the Spanish Tax Office (Hacienda or AEAT) struggles understanding both a buyers’ and sellers’ plight in a buyer’s market. Given today’s bargain prices, below Hacienda’s rateable values, buyers will be demanded supplementary Property Transfer Tax and, by the same token, sellers will be demanded additional Capital Gains Tax as I explain in detail in my article Taxes on Selling Spanish Property; they are two sides of the same coin.

Planning ahead is key to mitigate tax exposure on buying or selling Spanish property safely. I strongly advise both buyer and seller hire a competent lawyer.

If you fail to plan, you plan to fail” – Benjamin Franklin.

Founding Father of the United States. Exceptionally gifted scientist, inventor, diplomat, writer, printer, postmaster and political theorist. Even politician in his spare time; nobody’s perfect.

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