Re: Re: Are You A Fraudster And Didnt Know It

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@vbtudor wrote:

Are you a fraudster and didn?t know it?

We mentioned in our first issue of the Coastal Trader about under declaring the value on your property and, how many, are now receiving fines. Many of you will have unwillingly done the same, but perhaps what you don?t realise is that this is fraud and you, the buyer and seller, are liable.

Common practice or common sense?
Many of you will have been told by your agent or lawyer, that some money is ?Black? and is passed under the table when the Notary leaves the room. Whilst it is common practice – so common many regard it as a right they don?t t want to lose – what it amounts to is Fraud. Agents even call the Notary beforehand to find out the best value to declare – so ingrained into the fabric of Spanish culture is this practice.

And many Owners will not sell you the property unless you give them black money.

What is black money?

Black money is the difference between the declared price and the actual sales price. So if you bought your property for ?100,000 and declared ?80,000 the black money element would be ?20,000. The reason why it happens is because the seller is liable to pay upto 35% of the profit as capital gains tax and the buyer pays IVA and taxes based on the sale price Also, many new developments are being built by illegal workers (in spite of Spain?s open policy on immigration) who are paid in black money. ? so in effect both parties gain ? don?t they?

Current EU Directive (2001/97/EC which came into force on Dec 28 2001 and had to be implemented in all EU members states by 15th June 2003) means the Spanish Government has a duty to clamp down on all forms of tax avoidance and money laundering. Especially since the recent fraud in Marbella, where a firm of Lawyers was involved in laundering money, to the tune of ?250M from Eastern European Mafia gangs, they are taking their duty seriously

Closer to home in Oliva the hacienda have started issuing fines to owners, most of whom were quite happy to declare the full value of their property and pay the full taxes but were advised by their agents to under declare. Some lawyers have many hundreds of such fines to deal with from their clients. So whilst you may gain short term you will probably be caught out in the long run and it will be you who has to pay the price not the seller.

Up until now the chances of being caught have been slim.

But bear this in mind,

The government has easy access to your bank accounts so can check things easily. Did you withdraw ?30,000 and take it to the Notaries office? ? Do you think this wouldn?t be noticed?

Although Spain?s Banks are not as diligent in declaring transactions as in the UK, things are changing. They now have a duty to report any extraordinary transactions ? when you put more than ?3,000 into your account you have to declare where it came from ? including the bank account it came out of.

This makes it much easier for the tax man to trace illegal payments ? and trace them they will. The government are putting together a new Bill with measures aimed at stamping out this and other such practices. These include

Making the final signing at the Notaries based on the private contract which must be brought along
Registering the method of payment on the escritura ? ie cheque, cash, bankers draft etc.

Including the Catastral number on all documents ? bills, IBI and the escritura itself making it easy to trace any monies.

What if the seller refuses to sell unless Black money changes hands?

Many have paid their deposit and have been told they need to pay some of the money in ?Black? money. They have been shocked and appalled as it goes against the grain of their decency, but have been persuaded to do so. Some have refused only to be told the house is no longer for sale ? and they will lose their deposit.

Clearly not knowing the law, they relent or lose their deposit. But what other option would they have?

Walking away is the best option. So in order that you do not lose your deposit ? DO NOT sign the private contract until you sort this thorny issue first. If you really cannot live without that dream house then here?s what you can do.

Have written into the private contract the actual selling price, the deposit to be paid and the amount to be declared. Make sure this is signed by the seller.

You then have a legal document that states the price paid and that under declared. Use this to your advantage and make sure you put the full amount, that would have been paid in taxes, aside for future fines you WILL be issued with.

Whatever you do make sure you get good sound legal advice from an abogoado ? and try to stay away from agent recommended solicitors unless you really trust the agent.
If you still feel uncomfortable but really cannot live without that house, then why not offer to pay the sellers taxes or meet them part way ? then at least everything is above board

If you under declare there is one simple fact. You have broken the law. Period.

If you get caught you cannot say later you didn?t know about it ? ignorance is no excuse. It is common practice, but so is speeding ? and you accept the risk when you speed on the motorway. That doesn?t make it right ? you just hope you don?t get caught. So you can accept the risk and hope you don?t get caught or plain don?t do it. .

What are the consequences?

If you don?t under declare you may well lose the sale.

If you do you commit fraud. At the very least you could be liable to pay these taxes at a later date anyway (when you probably don?t have the money to pay them), and will certainly be liable once you come to sell because the increase in value of your property will include the undeclared amount. For example, you bought your house at ?100,000 but declared ?70,000. You sell it in 3 years time at ?150,000, but by this time no one will under declare. You then pay Capital Gains tax (for non residents at 35%) on ?80,000 instead of ?50,000 meaning you are paying an additional ?10,500 in taxes. Compare this to the ?3,000 or so you saved by under declaring and make your own decision.

But worse still ? you could be liable to a prison sentence. Perhaps not many have gone to prison for this offence, but that doesn?t mean it wont happen. You would be just as guilty as the East European Mafia gangs

It is a buyers market at present and the onus is on you the buyer, to make sure you declare the true value. Walking away may have the desired effect and if enough people do it then the practice will cease to exist.

By the way it also works the other way. If you are selling a house to move back to UK, and under declare, what are you going to do with the money you didn?t declare?

Think it will be easy to get rid of?

Put it in your UK bank account and the tax man will be informed immediately which will start an investigation on you. Tell them it was from the sale of your property and you must show the tax receipts for the full amount of the money. Try buying a car with cash ? the dealer has a legal responsibility (under the pain of a 2 year mandatory prison sentence) to inform the tax office of every cash purchase that he is suspicious of. Just to be on the safe side he will inform the tax man anyway ? better that than a jail term.

Buy furniture in cash ? the same. The UK now has a policy that any unusual cash purchases are declared to the tax man ? what?s worse is that the informers are not allowed to tell you they have informed the tax man. So think very long and very hard before you decide to under declare when you buy or sell. Because the tide is changing and there will be very soon little likelihood of escaping the tax man ? and you may see the inside of a prison cell to boot

Thank you sooo much, very informative and as you say I hope with the changing market that all this under declaring goes by the way side. Thanks again for your help