black money

LoadingFavourite

This topic contains 17 replies, has 9 voices, and was last updated by Profile photo of Anonymous Anonymous 10 years, 1 month ago.

  • Author
    Posts
  • #52360
    Profile photo of Anonymous
    Anonymous
    Participant

    Is it too risky not to declare the full amount paid for a property? In view of the Spanish tax authorities clamping down on under-declare practices(to avoid capital gains tax). Even though I might lose out on a property, should I stick to my guns and tell the developer I want the full amount listed on the private contract?

  • #66777
    Profile photo of Anonymous
    Anonymous
    Participant

    Don’t underdeclare or you willl regret it dearly in the future.

  • #66781
    Profile photo of Anonymous
    Anonymous
    Participant

    I recently went on an inspection trip to CDS
    the first words out of the agents mouth were:

    “you realise you will have to pay some cash that will not be shown on the documents”

    i told him that i was not interested in paying black money, that it was illegal and that i was not gonna pay someone elses capital gains tax.

    he tried “it’s normal here in Spain” but i told him that if he could not find vendors who didn’t expect black money, i would use another agent who could.

    needless to say he could find such vendors, stick to your guns don’t let EA’s dictate to you, it’s a buyers market

    Chilly

  • #66782
    Profile photo of Anonymous
    Anonymous
    Participant

    As I have already stated in previous posts – it is fraudulent to under declare and the tax authorities are clamping down.

    At the moment it is fines that are being issued. But bear this in mind – Spain is under enormous pressure from the EU to stamp down on Black money as it is a source of money laundering – and the EU take this very seriously.

    Therefore dont be surprised if in the near future they start making examples of people and sling them in prison

    Also from my understanding (and I am sure one of our legal eagles will put me right on this) the Guardia Civil have the authority to enter any Notaries office at any time and if they find money being exchanged then the consequences can be dire – unless of course you can prove it is all legitimate money.

    You have been warned – so better to be safe than sorry.

    One final point – just like thieves who take car radios – if people didnt buy suspect radios then there would be no market for them. Likewise if people just dont buy houses where the vendor expects to under declare then the practise will evaporate

    Good luck

    Vince

  • #66795
    Profile photo of Anonymous
    Anonymous
    Participant

    Apart from the fact it is totally illegal, remember the real benefit is to the seller and not the buyer. On an under decleration of 50,000 euros the buyer would save 3,500 euros the seller would save between 8-17,500 euros depending on status. If you are buying a resale chances are the vendors will be taking their ill gotten gains, going back to their country of origin leaving you to pick up the peices if an undecleration is suspected or discovered. Fines, back taxes, or even as Vince says possible prison, is it worth it. Even if you avoid all this, if and when you sell in a few years time the chances that you would be able to underdeclare are slim leaving you to pay the capital gains (8-17,500 euros) that the previous seller avoided.

    Is still amazes me that the attitude of Banks, Solicitors, and the Notaries are so liberal to the situation. Whilst brown envelopes with large amounts of cash are less frequent, I have seen people recieve bank cheques that are immediatly taken to the bank ripped up and replaced by the bank for cash. Equally as discussed on a previous thread the vendor then has a large amount of cash which they have a problem to dispose of. The manner in which they use this cash could alert the Hacienda prompting an investigation which would implicate you.

    For many people buying a property may be their first purchase in Spain, dont start your life here as a criminal, it may sound extreme but tax evasion is a serious issue, and if discovered ignorance will no defence.

    Jim

  • #66796
    Profile photo of Anonymous
    Anonymous
    Participant

    Clearly ‘black money’ or maybe we can call it cash for services is prevalent in all societies. In my opinion, one of the reasons that people try to bend the rules is because they feel there is some injustice in the Tax system. I think everyone knows examples where they don’t agree with a particular tax and some people will pay expensive tax lawyers to get round paying as much tax. However there are plenty of cases where people are just cheats. Any government that has the job of collecting taxes has to balance the fairness of the system and the ease of collection against the possibilities for abuse and non payment.

    In the case of Capital Gains Tax in Spain, it was clear to many that a different rate of tax applying to a Non (Tax) resident owning a holiday home in Spain compared with a Spanish tax resident who has a home to sell was plainly not in the best interests of the EEC. Tax harmonisation is still a goal in the EEC although impossible to achieve.
    In the case of Capital Gains on property, I was given to understand that following EEC intervention and following a review of the situation, the Spanish authorities will be bringing out new rules next year to ‘harmonise’ the rate of tax. This could possibly mean that the 35% rate is reduced to 18% for non Residents. However we have to wait and see.

    This would seem to be a fairer system and a level of taxation that everyone can understand. It follows that if the majority of people accept that the tax is fair then only ‘cheats’ will try to avoid paying it.

  • #66797
    Profile photo of Anonymous
    Anonymous
    Participant

    I dont think bringing the rate of capital gains tax will make a difference. THe Spanish currently nly pay 15% and they still under declare. In most cuircumstances they arent liable for capital gains tax ebcuase it is their only home and they are buying another – but yet they still under declare – what possible benefit can they have in this case – absolutely none. But it is unfortunately ingrained into many poeples mind as a God goven right. Until this attitude changes then it will continue – hence the reason why banks and notaries turn a blind eye toit.

    However the tide is changing. This year we have made a lot of sales with Spanish only buyers and sellers and because we have informed them that the law is catching up on them – they have listened. Not one case of under declaring. So it is not impossible. The problem though IS perpetuated by estate agents (Foreign and Spanish) who have a ested interest in taking black money because they pay less tax. Perhaps here we have the rooot of the problem.

    If agents insisted that they will not sell your property if black money is required – then who would they go to. Unfortunately all too often it is the agent who is more than happy to accept the black money

    One day they will realise the error of their ways when they wwake up in a prosin cell and think – now that was just one envelope too many. It will happen – it is not a matter of if but when. And from the looks of things it wont be too long

    Vince

  • #66801
    Profile photo of Anonymous
    Anonymous
    Participant

    I do not have any knowledge about Spanish Tax residents owning a 2nd home as many do but there must be plenty of allowances for minimising taxes if you are a Spanish home owner especially if you reinvest the proceeds of a sale and buy another. I do know that if you are 65 or over then the Tax is negligible. Am sure it is a very complicated area ! To be made more complcated when the possible Gains tax is harmonised.
    I think that if I was buying a property (that I really wanted) where the owner was insisting on some ‘cash’ I would firstly try to work out what the seller was actually going to ‘save’ by underdeclaring. If I was the Estate Agent caught in the middle I would indeed try to discuss the practical differences without laying down the law. I think if both parties understood the practical situation then some agreement can be reached in some cases. Even if it meant that the purchaser pays the seller for his share of the additional tax that would have to be paid ! At the ned of the day it is just a question of mathematics and abiding by the rules.
    I also heard of sellers who wanted to sell the basic structure and charged a lot for the fitted furniture and all the other things that could easily have been removed! How much is a light fitting these days?
    And who is ever going to control the Agents! Clearly the authorities need to tackle the inadequacies of the Estate Agent system in Spain. The Estate Agents in UK are not always free from sin!

  • #66846
    Profile photo of katy
    katy
    Spectator

    A German woman left the Notary office in Vélez-Málaga yesterday with 150000 euros. The money was stolen when her and an estate agent went back to the car. Sounds like an inside job somewhere along the chain.

  • #66852
    Profile photo of Anonymous
    Anonymous
    Participant

    Vince wrote:-

    This year we have made a lot of sales with Spanish only buyers and sellers and because we have informed them that the law is catching up on them – they have listened. Not one case of under declaring. So it is not impossible. The problem though IS perpetuated by estate agents (Foreign and Spanish) who have a vested interest in taking black money because they pay less tax. Perhaps here we have the root of the problem.

    My question about this issue is, if you do get to meet the vendor of a property that seems to be the subject of a black money request and you then resolve the issue with the vendor, WITHOUT paying, is it possible to come to an agreement with the vendor without him / her being penalised by the agent?
    For example, when I bought my house in the UK I went to the owner without the agent being present and asked what she wanted for the property and it was £8000 less than the agent told me so I offered her what she wanted, without telling her of the agent’s mark-up and she nearly bit my hand off! The agent was a bit miffed but both of us were quite happy as I was offering cash – no chain.
    Do this happen or is it known to have happened in Spain?

    Cheers, stevmk2

  • #66853
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi Stebe

    I am surprised that you got away with that in the UK because basically the agent still has a come back on the vendor if he/she introduced you to the vendor and you susbequently bought.

    It does happen in Spain but some points to note

    1. The agents now usually have something written with the client so it is not in their interests to go against the agent – although they will try of course given an opportunity (we don’t take anything on without a signature authorising the sale which also states the commission payable and the advertised price and that if we introduce a buyer and that buyer buys they are liable to the agreed commission – even if they subsequently go behind our backs.). This can be used to block the sale at the notary if need be

    2. Most foreginers coming to buy in Spain do not speak adequate Spanish to be able to broker such a deal. Not sure it is an area that your solicitor would help out with either (but he just might)

    3. The agents seldom let the buyer and seller come together (not all do this but a lot do)

    However if the agent has already vetted the client against black money then it is unlikely that agent is going to be taking his fees in black money. The agents that persuade a client not to accept black money are doing so because of trying to keep on the right side of the law, so they are hardly likely to want their payment in black money. Whereas an agent who doesnt care IS more likely to want paying in black money

    Personally when anyone now tells me they require black money I just dont bother listing it – why put yourself in that situation.

    Best wishes

    Vince

  • #66854
    Profile photo of Anonymous
    Anonymous
    Participant

    @stevmk2 wrote:

    My question about this issue is, if you do get to meet the vendor of a property that seems to be the subject of a black money request and you then resolve the issue with the vendor, WITHOUT paying, is it possible to come to an agreement with the vendor without him / her being penalised by the agent?

    In a recent thread there was a discussion about commision levels charged by agents and the fact that vendors had not signed a sales order stipulating the commisions involved. The sales contract is to protect all parties. Both the buyer and vendor will be fully aware of commision charges, and for their part the agent has the signed consent of the vendor to act as mediator in the sale of the property. Once a buyer is introduced to the property/vendor the agent would claim his commision even if the buyer/vendor did a back door deal.

    Back to the issue of black money, we were close to losing a deal recently as the vendor had previously underdeclared when buying and did not want to fully declare on the sale. The buyer however was rightly so, not happy to underdeclare. We proposed that the property be fully declared minus the commision and that the buyer pay us a finders fee (duly appropriatley invoiced as such) The result was all parties working together to find a solution, total transparancy, and everyone happy. And yes I know that the finders fee was still a cost to purchase the house and that when reselling if he added in that cost it would be subject to future CGT, this however was not his prime concern, it was staying within the law whilst wanting the house.

    I guess the point is that with honesty and transparancy it is often possible to find a solution that benefits everyone

    Jim

  • #66855
    Profile photo of Anonymous
    Anonymous
    Participant

    If you have signed an agreement with an agent in Spain, and you cut him off like this, legally he can claim his commission. And rightly so.

  • #66865
    Profile photo of Anonymous
    Anonymous
    Participant

    A qestion for two people here

    @vbtudor wrote:

    even if they subsequently go behind our backs.). This can be used to block the sale at the notary if need be

    Vince can you tell me how this would work and what the fall out would be?

    Thanks Vince

    And for Drakan, I know your position on under declaring is very clear but from a broader perspective, how is the Spanish Legal profession reacting to a precieved change re Black Money.

    Thanks Drakan

    Jim

  • #66866
    Profile photo of Anonymous
    Anonymous
    Participant

    Hi Jim

    If you have a contract with the vendor and he subsequently goes behind your back and you find out about it before the notary you can ask the notary to embargo the sale until your debt is paid or to pay it out of the proceeds. You would obviously need unequivocable proof that he owed you this money and that the client you introduced was in fact introduced by you – so a client registration and visitation form is useful – basically the client signs this to say they will visit a list of properties and later to say they have seen it.

    After that just go to the notary and he will if convinced put an embargo on the sale. I have only seen it happen once and the owner got a shock to find out he would have to pay the commission anyway. I am all for agents reducing commissions to a reasonable level but if you agree something with them and they do do the job that is asked of them then you owe them the money – its very simple.
    Best wishes

    Vince

  • #66893
    Profile photo of Anonymous
    Anonymous
    Participant

    My thanks to Vince, Jim & Drakan for all of your advice & information.

    One thing that I didn’t actually mention Vince is that, when I bought my UK house, the vendor’s agent was not cheated out of his commission & I’m not advocating that as a possible option Drakan.
    Of course the agent is entitled to commission and, in my particular case here, the agent was paid on a percentage basis so he was not happy about the lower level of commission, although the difference was not that much & he had had the property on his books for eight months, producing only two potential buyers in all the time!

    Inflexibility on price had probably been instrumental in deterring potential buyers because I found out later that the vendors had left everything totally in the agent’s hands, even though a previous agent had also failed to attract any buyers at all for five months!
    I might add that this is a quite a large town house & has an enormous garden and is now considered highly desirable. It just needed updating.

    My big worry is Black Money and it’s probably the main worry of people in my position in the UK who intend to move to Spain.
    Friends of mine did a black money deal, despite my advising them strongly NOT to do so, and I’m very concerned for them.

    Thanks to this forum & others I check on regularly, I’m getting quite a database of information on Spanish property purchasing and, so far, nothing other than the black money issue fazes me now.
    Thanks again everyone,
    stevmk2

  • #66895
    Profile photo of Anonymous
    Anonymous
    Participant

    @stevmk2 wrote:

    Thanks to this forum & others I check on regularly, I’m getting quite a database of information on Spanish property purchasing and, so far, nothing other than the black money issue fazes me now.

    No need to be fazed, its simple dont do it!

    Jim

  • #66962
    Profile photo of Anonymous
    Anonymous
    Participant

    In this area at least, the sad factor is that although there is under declaration, in some ways there isnt really. Dodgy agents have used this common but illegal practice to hide their overinflated commissions. One contarcat with vendor, a different one with buyer. Admittedly at the end of the day the CG issue will be the same, but this deep-rooted illicit practice has enabled unscrupulous “thieves ” to actually line their pockets.

    If someone is willing to pay 45K for a property then the vendor should be getting that (minus a reasonable small% or flat fee) the agent, shouldnt be pocketing 27k!. These figures are not plucked out of the air. Some friends bought a ruin, direct from the Spanish owner, whom they met by chance at the notary’s office when both parties were there for other matters. This property had been on the market for some time, with various agents, all marketing it at over 40k. The owners wanted 18k, always had, and always would,hadnt dropped the price, and weren’t desperate to sell, or indeed in any hurry. The reality is that few buyers speak enough Spanish to even attempt to speak to the vendors directly, even if they do live locallyand the “kindly” crooks do all the intermediate bargaining, hiding the true facts, and some are even stupid enough to carry on with this when buyer, vendor and agent are all local and speak the same language.

You must be logged in to reply to this topic.