Let's delve a little deeper into the recurring topic of the values declared in the deeds and the possible actions to be taken when the values are verified by the administration.
It is often heard that if a minimum value is not declared in a deed, you can be fined. Nothing could be further from the truth, since the administration will only apply a fine when a value lower than that resulting from the application of the corresponding rule of the Wealth Tax (normally the cadastral value) has been declared.
We will try to be brief, without diminishing in any way the need for precision that every legal issue must have.
We must start from the fact that the taxable base for the property transfer tax, as well as for the inheritance and gift tax, is the real value of the assets and rights transferred. In the event that the declared value (the one stated in the deed) is not the real one, the Administration may, in any case, verify this value, by the means established in the Article 52 of the General Tax Law.
THE CONSEQUENCES OF CHECKING VALUES
The consequences of a value check may be as follows:
1.- If the value declared by the interested parties is higher than the result of the verification, it will be considered as a taxable base. That is, if we declare a value higher than that which would result from applying the value update tables, the administration will be very happy but will not give us a penny back.
2.- If the verification of the values carried out by the administration results in values higher than those declared by the interested parties, we are allowed two actions:
2.1.- The challenge of the liquidation.
The challenge would be an action to verify that the administration has acted within the terms provided for in the legislation that regulates the corresponding procedure for setting values. There may be some errors, but normally the administration's actions are correct.
Perhaps the most common way of challenging the verification of values is the lack of motivation for the actions of the administration and why it has reached the conclusion of what the real value of the property is, which could lead to the nullity of the file, but which would have as a consequence the initiation of another file with the errors already revealed corrected.
That is to say, except in very serious cases, challenging the values will only allow us to gain some time, because the core of the issue, that is, what is the value of the assets, is not up for debate.
In any case, the fact of challenging the assessment because it is not sufficiently motivated or for any other reason, produces the immediate effect that the payment of the liquidation is also suspended without presentation of any guarantee.
This way we have more opportunities to attack the procedure and we also delay the payment until the end of the procedure, which can mean many months of suspension. Although we must consider that if we lose we will have to pay the accrued late payment interest (5% for the year 2013, better than that offered by any financial institution).
2.2.- Promote the practice of contradictory expert appraisal.
The contradictory expert appraisal is a tax procedure that allows the results of value verification procedures to be rectified.
For example, if we declare in a deed that the property has a value of 120,000 euros (which is what we have actually paid) and the administration considers that this value is not the real value of the property, it can be requested by the interested parties within the calendar month following the notification of the agreement to end the value verification procedure, which generally occurs with the joint notification of the value and the resulting supplementary settlement.
The request for initiation also causes the execution of the liquidation and the period for filing an appeal or claim against it to be automatically suspended without the presentation of any guarantee.
This value verification procedure comprises the following phases:
a) The Administration will notify the appraisal of the same by the expert and the interested party will be granted a period of ten days to appoint an expert with a qualification appropriate to the assets to be valued.
b) Once the interested party's expert has been appointed, he will be given a list of assets so that he may present his valuation within a period of one month, which must be sufficiently justified.
c) Once the appraisal of the interested party's expert has been received, if the difference with that of the Administration is equal to or less than 120,000 euros and to 10% of the interested party, the value of the latter will be taken as the result.
It is worth pausing at this point since the above rule offers us the possibility of reducing the verified value in an easy way, thus ending the procedure without having to resort to a third-party expert.
I will give an example, if the Administration checks a value of 500,000 euros and our expert says that the property is worth 456,000 euros, the value of 456,000 euros is automatically accepted as the 10% of this value is less than the difference between valuations and also less than 120,000 euros. Not much? Maybe, but if we think for example about taxes with a rate, for example of 8%, we will be saving 3,520 euros in tax.
d) In the event that the difference verified by our expert is greater than that indicated in the previous point, the Administration will proceed to appoint a third expert, who will be the one to definitively determine the value, and who will be chosen by drawing lots from the list provided by the corresponding professional association.
e) Once the charge has been accepted by the third expert. The value verified by the third expert is final and will serve as a basis for the Administration to issue the corresponding liquidation or cancel the previous one.
If the value resulting from the process is higher than the value initially declared, the Administration will notify us within one month of the relevant settlement, together with the late payment interest. If the notification is not made within this period, the calculation of interest will be suspended from the date of the month following the end of the process.
Furthermore, with the communication of the result of the contradictory expert appraisal, the interested party will be required to pay, if applicable, the amount of the fees of the third expert, and in the event that this is not accredited, which is the most normal thing since otherwise we would advance the payment twice, the deposit will be available for the payment of the same.
Is it worth using the adversarial expert appraisal procedure?
If we are not sure that the value verified by the Administration is very high and completely wrong, we may end up paying more money for the fees of the experts and late payment interest than the possible reduction in the resulting tax rate.
But even if we want to reduce the value verified in the 10% and with a limit of 120,000 euros, it is easy to achieve this automatically and we will only have to pay the fees of our expert. We have to do the math.
An important issue related to everything we have discussed is the issue of possible improvements made to the property that were not present at the time of acquisition. To make it clear that these improvements or the condition of the property, at the time the expert makes the appraisal, were not present at the time of acquisition, it may be highly advisable to draw up a notarial act that serves as a guide for the appraisal of the experts.
Two issues related to checking values
One of them is the power that the administration has, and which I have never seen exercised in my professional life, consisting of the fact that when the verified value exceeds the declared value by more than 100 %, the public administration will have the right to acquire for itself the transferred assets and rights, a right that can only be exercised within six months following the final date of the tax settlement.
Whenever this right is exercised, the amount of the tax paid for the transfer in question will be refunded. The occupation of the goods or rights must be preceded by the full payment of the price, consisting exclusively of the declared value.
Another, as an exception to the entire system reflected in the previous lines, is that the value set in the resolutions of the bankruptcy judge for the transferred assets and rights will be considered to correspond to their real value, consequently no verification of values will be required, in the transfers of assets and rights that occur in a bankruptcy procedure, including the assignments of credits provided for in the judicially approved agreement and the disposals of assets carried out in the liquidation phase.
We end this entry by placing special emphasis on the convenience of proper advice before signing any type of transfer, in the assessment of the pros and cons of any decision we make, since in the long run it determines enormous cost savings.
