When you buy a used property you have to pay the Property Transfer Tax (ITP), a tax that is regulated by the Autonomous Regions and that varies depending on the region. However, Spanish regulations contemplate a situation in which the buyer can avoid paying this tax, which ranges from 4% (in the Basque Country) to 10% of the value of the property. If a mortgage is not required, it is possible to sign a private contract that only has effects between the parties and their heirs. In order for it to have effects before third parties, such as the Tax Agency, it is necessary that it is notarised in a public deed before a notary. The date of the private contract counts for the Inland Revenue as soon as it is entered in a public register or handed over to a civil servant and this is the key to saving tax.
The effects of a private document with regard to third parties are regulated in Article 1227 CC: “the date of a private document shall not be counted with regard to third parties except the day on which it was incorporated or entered in a public register, from the death of any of those who signed it, or from the day on which it was handed over to a public official by reason of his office”.
The time limit for the Inland Revenue to determine the amount and collect the ITP is four years from the date of the transfer. And… when does this period start to run?
Article 50.2 of R.D.L. 1/1993, which approves the Revised Text of the Tax on Transfer of Property and Documented Legal Acts (TRITPAJD) establishes that “the date of the private deeds will be presumed to be the date of their presentation, unless any of the circumstances foreseen in article 1.227 of the Civil Code occur previously, in which case the date of incorporation, registration, death or delivery will be calculated…”.
Let us take the example of a person who bought a property and signed a private contract with the seller which was not notarised and was not registered in the Land Registry. The time limit (four years) to demand payment of the ITP had expired for reasons such as the fact that the buyer had the house in his name in the Cadastre and had been paying the IBI for more than four years, i.e. he was the cadastral owner of the property and had paid for more than four years the expenses of the community of owners since the purchase of the property. This shows that there was a handover of the property by the seller without a title deed.
And in this case, the limitation period of four years had been complied with, as this period had to be counted from the registration of the private contract in a public register (the Cadastre), one of the conditions of art. 1227 CC for a private document to have effects against third parties. In addition, and as the Supreme Court has declared, the transfer can also be proved by means other than those of Art. 1227 CC.
What happens if the seller of the flat dies before the contract of sale is made public?
Salvador Salcedo, a lawyer at the law firm Ático Jurídico, points out a specific case: that of the buyer who visits the law firm because, after the sale of the flat, one of the sellers dies without the contract having been notarized. Now the heirs of the seller, who died more than five years ago, must appear at the signing at the notary’s office, which means that the four-year limitation period had already expired.
The buyer is wondering whether or not he should pay Transfer Tax (ITP) for the purchase of his flat, bearing in mind that he acquired the property with a private contract more than 10 years ago. And that since then the IBI and rubbish tax receipts for the property have been issued by the Town Hall in the name of the buyer, who is the one who pays them on time.
The Directorate General of Taxes, in several recent binding consultations (V1211-2021 and V1179-2018), has had occasion to analyze this problem. It points out that, for the purposes of the statute of limitations, the date of the private contract is presumed to be that of its submission for payment, even if it is of an earlier date.
“In this case, the death of one of the sellers is a fact that allows the antiquity of the sale to be attested, given that the deceased seller could not sign the private contract after his death. Therefore, since the death occurred more than five years ago, the ITP can be considered time-barred. Why? Because the prescription period of four years provided for in article 66 of the General Tax Law 58/2003 has elapsed”, states Salvador Salcedo.
Translated with www.DeepL.com/Translator (free version)