When a person or company is interested in acquiring a property in Spanish land, the first thing that must be done before formalising any private contract and/or deed is to check the status of the property through the request to the pertinent register of property of a property information extract (known as nota simple). This extract will show the current owners of the property, its description and the different liens encumbering the property, such as leases, usufructs, mortgage loans on the property, etc. This information is essential, since the buyer obtains official data of the property thanks to it, which is of huge importance before continuing with the purchase process.
Apart from the aforementioned information, in this nota simple extract, a marginal note of tax nature may appear sometimes, which is often overlooked, but these marginal notes are actually of huge importance too, since they might cause that the buyer, in the event that he finally acquires the property, be forced to pay in the future unexpected amounts to the public treasury with regard to taxes that he did not know about, since the marginal notes are related to tax events that are previous to the purchase and, as informed by the extract, may be subject to checking by the administration and therefore may generate a tax debt for which the property would serve as collateral, regardless of who the owner thereof is.
But so that the reader can understand what we are talking about, it is convenient to briefly explain the Spanish tax system with regard to how the collection of taxes is carried out. There are two main ways to pay taxes in Spain: the first one is through self-assessment and the second one through settlement made directly by the tax administration itself.
The purchase, as well as the inheritance and gift with regard to immovable properties, belongs to the first group, that is, the self-assessment, which basically means, as indicated by its own name, that the party (the taxpayer) that acquires the property through purchase, inheritance or gift, has to settle the tax liability, that is, preparing the tax form and proceeding to pay the tax through a deposit in a banking entity collaborating with the administration. The amount to pay has as a starting point or basis the value that the buyer/heir/giftee has freely ascribed in the deed. That is, in the case of purchase, inheritance or gift, the party receiving the property does not only carry out all tax payment formalities, but also establishes the value of the property, and on this basis the pertinent tax amount will be calculated.
But this flexibility that the administration gives to the taxpayer to establish the amount to pay in the purchase/inheritance/gift has its opposite in the power of the administration to, in a period of usually five years, review the self-assessment and most especially the value ascribed to the property in the deed; the starting point, as we said above, for the tax calculation.
Therefore, if the administration disagrees with the amount paid for the pertinent tax for the acquisition of a property, either a purchase, inheritance or gift tax, for considering it less than the amount that, according to their criteria, would be correct (the administration works with a database that helps them know what the approximate price of a property in the market is, and therefore be able to establish which price would be theoretically correct to pay for the transfer of property), it will initiate a procedure against the taxpayer, that is, the buyer, heir or giftee, as the case may be. In this event, a procedure of verification of the value of the property is started, and if the tax administration finally decides that the amount paid as tax on property conveyance is less than what it should have actually been paid, the tax verification shall be followed by the pertinent claim by the administration to the taxpayer (buyer/heir/giftee). Obviously, the original amount paid by the taxpayer in the self-assessment would be discounted from the amount of the claim.
Having said this, and going back to the matter of the marginal note of tax nature at the beginning of this article which, as we stated before, appears sometimes in the nota simple extract of a property regarding a purchase/inheritance/gift, issued before the acquisition of it, it informs us of the fact that a verification of the tax self-assessment submitted by the current or previous owners has not been carried out, and it tells us, especially, that the administration has still the right to carry out said verification, since the time for it has not yet expired. A clear conclusion can be drawn from all this: If the new party finally buys the property in which a tax marginal note appears due to a previous purchase/inheritance/gift, the new owner might be forced to pay a tax debt of the previous owners, since the property has the aforementioned marginal note, and is therefore subject to economic liabilities arisen from said tax events, and all this regardless of the fact that there is a new owner that has nothing to do with the purchase, inheritance or gift that has been reviewed, since that is exactly the role of the marginal note, that is, to inform people unconnected to the property of the possible future verification of a tax self-assessment related to the property and the pertinent responsibility that the future owner would have with respect to future tax claims by the administration. It is true that, in the event that the new owner is finally forced to pay the tax debt of the previous owner/s in order to avoid losing the property, he will always have the option to initiate an action for recovery against the previous owner, but this does not lessen the importance of the matter in any way, since, in addition to the legal costs that he must bear in the event that the original tax debtor refuses to reimburse him for his expenses, it is possible that once that the new owner of the property obtains a favourable ruling, he cannot recover the money due to insolvency of the former owner, or to the impossibility to locate assets owned by him, or to any other reason that impedes the money recovery.
It is therefore advisable in these cases that, when a person or company has the intention to acquire a property and a marginal note of tax nature appears in the informative extract of the property issued by the register of property, the buyer requests information to the seller before signing, regarding the tax settlement that originated the marginal note. For this reason, he must request the documents related to said tax settlement and verify with the help of a professional if the self-assessment was made correctly and based on correct values or if, on the contrary, was made with unrealistic values and is therefore subject to the aforementioned consequence of a verification of values and a subsequent tax claim by the administration. In the latter case, and if the buyer is still interested in the purchase of the property, in spite of that circumstance, it would be advisable to obtain some type of guarantee by the seller that he will be liable for possible future tax claims by the administration related to the marginal note, without ruling out a possible withholding of purchase price money under the condition to pay it once that the administration claim is definitely discarded after some time. In short, there are solutions to neutralise the risk of the buyer in a purchase under these circumstances, but it is necessary to first know the extent of the problem, something that we have tried to explain in this article and hope to have clarified.