Black Money – are you a fraduster and didn’t know it?

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This topic contains 21 replies, has 7 voices, and was last updated by Profile photo of Anonymous Anonymous 10 years, 12 months ago.

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  • #51334
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    Anonymous
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    Hi there everyone.

    I have just written an article for a local paper in North Costa Blanca about the subject of Black Money, what it is, what it means if you under declare, what the consequences are and some ideas to help if you are faced with it.

    You can find it at
    http://www.spanishproperty-direct.co.uk/article_buying16.htm
    It is entitled “Are you a fraudster and didnt know it?”

    Any comments please get in touch directly or through this forum

    regards

    Vince

  • #59720
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    Anonymous
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    Good article Vince

    This whole thing of black money is why I have so far not bought a property in Spain. I have looked at several resales off plan but as yet have never been given a satisfactory answer on this black money issue.

    Now I know a bit more and am glad I was not sucked into the whole murkey business

    Regards

    Kevin

  • #59520
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    Anonymous
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    Good article Vince

    This whole thing of black money is why I have so far not bought a property in Spain. I have looked at several resales off plan but as yet have never been given a satisfactory answer on this black money issue.

    Now I know a bit more and am glad I was not sucked into the whole murkey business

    Regards

    Kevin

  • #59721
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    Anonymous
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    Hi there Kevin

    You are more than welcome. I hope the article will make others sit and think about what the consequences are- they are serious and something we wouldn’t consider in the UK but are made to do so by others who just want to sell.

    Anyway if it makes people think then I am happy

    thanks for your comments

    Vince

  • #59521
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    Anonymous
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    Hi there Kevin

    You are more than welcome. I hope the article will make others sit and think about what the consequences are- they are serious and something we wouldn’t consider in the UK but are made to do so by others who just want to sell.

    Anyway if it makes people think then I am happy

    thanks for your comments

    Vince

  • #59731
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    Anonymous
    Participant

    Good Article.
    One question, are the Spanish Tax Authorities planning on chasing and fining people retrospectively and if so how far back are the likely to go?

  • #59531
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    Anonymous
    Participant

    Good Article.
    One question, are the Spanish Tax Authorities planning on chasing and fining people retrospectively and if so how far back are the likely to go?

  • #59732
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    Anonymous
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    Hi Jem

    thanks for your comments. With rgeards to the question I believe they already are. I know of people locally who are being fined now – currently the furthest back is about 3 years. What is happening (and I can only speka for here not the Country as a whole) is this. They have decided everyone who bought their home has underdeclared by 20% (probably not far off the mark) and issue fines accordingly.

    If you appeal the fine then you have to prove that the price you paid was the price at the time. They will organise a catastral valuation and endeavour to determine the value of your property at the time you bought it – based on what I dont know but they will probably apply the price per sq m formula of the price at that moment in time.

    If they find that your property is correctly valued and declared then they will waive the fine – however you will still have to pay for the administration of the survey, the instructing of the lawyers and the architects etc which will amount to around €1,500 so it may not be worth your while. Alternatively they may find that your house was valued much higher and slap a bigger fine on it.

    If you kept all the original paperwork (the private contract, receipts for the deposit, receipts for all monies paid) then it should be even easier to prove – but not manuy I know who have (I dont think I have either).

    Hope this helps

    regards

    Vince

  • #59532
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    Anonymous
    Participant

    Hi Jem

    thanks for your comments. With rgeards to the question I believe they already are. I know of people locally who are being fined now – currently the furthest back is about 3 years. What is happening (and I can only speka for here not the Country as a whole) is this. They have decided everyone who bought their home has underdeclared by 20% (probably not far off the mark) and issue fines accordingly.

    If you appeal the fine then you have to prove that the price you paid was the price at the time. They will organise a catastral valuation and endeavour to determine the value of your property at the time you bought it – based on what I dont know but they will probably apply the price per sq m formula of the price at that moment in time.

    If they find that your property is correctly valued and declared then they will waive the fine – however you will still have to pay for the administration of the survey, the instructing of the lawyers and the architects etc which will amount to around €1,500 so it may not be worth your while. Alternatively they may find that your house was valued much higher and slap a bigger fine on it.

    If you kept all the original paperwork (the private contract, receipts for the deposit, receipts for all monies paid) then it should be even easier to prove – but not manuy I know who have (I dont think I have either).

    Hope this helps

    regards

    Vince

  • #59733
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    Anonymous
    Participant

    Hi Jem

    thanks for your comments. With regards to the question I believe they already are. I know of people locally who are being fined now for property transactions relating to points in the past – currently the furthest back is about 3 years.

    What is happening (and I can only speak for here not the Country as a whole) is this. It appears they have decided everyone who bought their home has underdeclared by 20% (probably not far off the mark) and issue fines accordingly.

    If you appeal the fine then you have to prove that the price you paid was the price at the time. They will organise a catastral valuation and endeavour to determine the value of your property at the time you bought it – based on what I dont know, but they will probably apply the price per sq m formula of the price at that moment in time.

    If they find that your property is correctly valued and declared then they will waive the fine – however you will still have to pay for the administration of the survey, the instructing of the lawyers and the architects etc which will amount to around €1,500 so it may not be worth your while. Alternatively they may find that your house was valued much higher and slap a bigger fine on it.

    If you kept all the original paperwork (the private contract, receipts for the deposit, receipts for all monies paid) then it should be even easier to prove – but not many people I know have done so (I dont think I could lay my hands on mine).

    Like all things in Spain the Tax authorities differ by area so it may different where you are. Also in certain towns here (like Oliva and Ontinyent and others) they tend to pick up on things like this quickly whereas others – my own town of Piles – tend to be much slower to react. The cynic in me says this is a path of low resistance to earn quick money – bearing in mind Spain loses a lot of grants next year from the EU – they have to get their money somehow.

    Hope this helps

    regards

    Vince

  • #59533
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi Jem

    thanks for your comments. With regards to the question I believe they already are. I know of people locally who are being fined now for property transactions relating to points in the past – currently the furthest back is about 3 years.

    What is happening (and I can only speak for here not the Country as a whole) is this. It appears they have decided everyone who bought their home has underdeclared by 20% (probably not far off the mark) and issue fines accordingly.

    If you appeal the fine then you have to prove that the price you paid was the price at the time. They will organise a catastral valuation and endeavour to determine the value of your property at the time you bought it – based on what I dont know, but they will probably apply the price per sq m formula of the price at that moment in time.

    If they find that your property is correctly valued and declared then they will waive the fine – however you will still have to pay for the administration of the survey, the instructing of the lawyers and the architects etc which will amount to around €1,500 so it may not be worth your while. Alternatively they may find that your house was valued much higher and slap a bigger fine on it.

    If you kept all the original paperwork (the private contract, receipts for the deposit, receipts for all monies paid) then it should be even easier to prove – but not many people I know have done so (I dont think I could lay my hands on mine).

    Like all things in Spain the Tax authorities differ by area so it may different where you are. Also in certain towns here (like Oliva and Ontinyent and others) they tend to pick up on things like this quickly whereas others – my own town of Piles – tend to be much slower to react. The cynic in me says this is a path of low resistance to earn quick money – bearing in mind Spain loses a lot of grants next year from the EU – they have to get their money somehow.

    Hope this helps

    regards

    Vince

  • #59806
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    Anonymous
    Participant

    I have just read this article and I have to say it is great, although it is a bit worrying. I am looking at buying soon and have never heard of black money before – is it common to all areas? I am looking at Costa Brava.

  • #59620
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    Anonymous
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    I have just read this article and I have to say it is great, although it is a bit worrying. I am looking at buying soon and have never heard of black money before – is it common to all areas? I am looking at Costa Brava.

  • #59830
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    Anonymous
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    Black Money going by other names in different countries does exist through out europe to some degree. As an Agent I am delighted that this disshonesty is now being addressed and have no problem at all of indicating at all times any income gained. The Legal profession is also I might add discouraging such activity also in my experience.
    For heavens sake you make a profit pay your dues,it is only what would happen in your own country!

  • #59917
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    Anonymous
    Participant

    I know somebody who under declared – and declared only about 70% of the real price – yet got an an 80% mortgage. So the Caixa was effectively in on it too!

  • #59919
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    Anonymous
    Participant

    I have also heard recently of a well respected lawyer asking for payment by;

    (a) Cash.

    (b) funds to be paid into an employees private account. ( Receipt given by law firm)

    Is this because it is not being declared?

  • #59920
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    Anonymous
    Participant

    That was a good read Vince. I am in full agreement with you. I have been pressured by agents to underdeclare but like you say it doesnt make financial sense in the first place, and then you’re breaking the law on top of it.

    One estate agent pulled such a face when I told him that I wasn’t going to pay with black money. His face said -you don’t understand the spanish way of doing things you idiot. Well I understood only too well.
    Articles like yours are very useful in educating the expat community.

  • #59927
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    Anonymous
    Participant

    one

  • #59928
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    Anonymous
    Participant

    oops sorry about above message!!

    very interesting article.

    However one further point, and the main reason that agents DONT wnat the full amount declared, and sales fall through, is that, the selling price has sometimes been massively inflated by the agents commission, and often the
    ” let´s not declare this amount 😉 ” is a ploy to hide commissions that I have personally come across as high as 150% of vendors asking price.

    Also, one is not liable for the tax on the commission, that portion is “costs”
    so if a buyer can establish which portion is commission , and is happy to pay that, then get that shown separately, on the deposit contract or documented somewhere, to prove the matter should the authorities come looking.

    If buying extras, like furniture, get that listed and the value separately.
    The 7% is a property ( land and buildings) tax.

    If the agent, vendor and all others are above board, they shouldnt mind,
    listing these items separately, as this document could protect them too.

    After all , these agents have websites, showing the prices, and would find it hard to deny they were involved in the sale when the taxman comes after them, and if the website, printed off leaflets, etc say 100k, it´s a bit difficult to ” prove” you only paid the declared 70k.

    They have 5 years to catch you out, its written on the nota simple for your property once you have purchased it ( well in Almeria province anyway).

    Some escrituras, beggar belief…………….. “purchase price” 25k, and the bank is there collecting what they are owed on an oustanding mortgage granted 5 yrs previous for 30k…………….
    That one I dont think they´d ever get out of, if it´s looked at within the legal time span!

    nikvin

  • #60044
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    Anonymous
    Participant

    As a confirmation perhaps of the market this week I have assisted two friends to buy a house. In both cases I mentioned about black money and in both cases advised the buyers do not get involved with it (something which was later reinforced by their lawyer)

    The 2 agents in question said that “Oh dont worry it is common practice in Spain”. When I asked if they would serve the prison sentence for the clients they thought I was mad. When I asked them if they would pay the subsequent fine if it came about we were told that it just didnt happen – then I pointed out that I persoanlly knew 9 people who had been fined and knew of many more.

    When we mentioned that the deal was off unless their clients agreed to declare the full amount – funnily enough in both cases the deal was back on

    Which just goes to show that if you stick to your guns you get what you want. It may have been common practice in Spain – but it is now more common to actually be legal. Even the Spanish vendors (here anyway) are coming round to this way of thinking.

    And remember it is very much a buyers market – you are in control. If the seller isnt interested in selling on legal terms then walk away – I guarantee that there will be another house round the corner. The developers generally arent very inventive and tend to build very similar proeprties – so you are bound to find a similar one somewhere – seldom are properties here unique.

    Also keep your private contract and any documentation in case you got an absolute bargain and the hacienda dont believe you. It makes it easier to prove later on.

    Good luck

    Vince

  • #60118
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    Anonymous
    Participant

    Hi Kevin,
    When buying an off plan resale property, you are not buying the property but the contract entitling you to purchase the property on completion.
    The price of the property is stated on the contract and this is the price that will go on the escritura [title deed] regardless of whether you pay more or less than the price on the contract.

    Virtually every Spanish property is worth more on completion than the price on the contract, because most folks purchase 2 years prior to completion, they are exposed to CGT on the increased value over the construction period, which is the difference between the contract price and the declared resale price when they sell.
    CGT on property sales by non residents purchased recently currently starts at 35% and decreases the longer you own a property before selling.

    Selling a contract for an off plan property does not attract CGT which explains why so many speculators buy to resell before completion, they should declare the income in the country in which they are resident and pay income tax, but most do not.
    The Spanish taxman is not concerned with the tax declarations of non residents, unlike property sales the sale of a contract is a private matter between the lawyers of the developer, seller and purchaser.

    The situation on the Costa del Sol now is, speculators wishing to resell before completion outnumber the end owners, many speculators having bought several units, some are financially unable to complete and so are selling for the contract price or less. These are “distressed sales” and do provide good opportunities for investors who wish to be in the Spanish property market long term.

    Unfortunately many real estate companies do not make the facts and dealings of these sales transparent.
    When considering purchasing a contract you should always take a copy of the contract to an independent abogado [Spanish lawyer] the price, payment terms and conditions are clearly stated on each contract.
    Payment terms are typically 30% down / 70% on completion, but do vary.
    You should only pay the price the speculator has paid so far, according to the terms of the contract plus the 7% IVA [VAT] the payments attract.
    On purchase of the contract you will then be responsible for the final payment or payments as stated in the contract.
    Anything you pay above this amount [no IVA] will be profit for the speculator, but of course he will have to pay his legal fees and any agents commission agreed.

    I hope this answers you question.
    If you need any more information, or have any questions please contact me.
    Best regards
    Steve Gilbert

  • #60169
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    Anonymous
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    Hi Steve,

    Thank you for the useful information.

    You mentioned in your post that CGT on property sales by non residents purchased recently currently starts at 35% and decreases the longer you own a property before selling.

    Do you know where I could find more information on this? How is that calculated?

    Regards,
    JS

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