Insight into the Spanish property market, guides to help you make informed decisions, and a directory of real estate professionals and home service providers from a source you can trust.
This is a website for buyers, owners, and sellers of property in Spain, offering reliable information and resources to help you get things done with confidence. It is run by Mark Stücklin, author of the Spanish Property Doctor Column in The Sunday Times (2005-2008), and the book ‘Need to Know: Buying Property in Spain’ published by Collins.
When you buy or sell property in Spain the sums of money are large, perhaps one of the biggest financial decisions of your life. The high transaction costs you will face like taxes and commissions only make the decision more important to get right. And when you own property in Spain you face a host of extra challenges to manage, and costs to control. Unfortunately, the Spanish property market is opaque and full of pitfalls, and notoriously unprofessional. Buying and selling property in Spain is not a decision to be taken lightly, and you may find it much easier to buy than sell if you don’t take care. In this market it is crucial to do your own research, and don’t rely exclusively on people who are trying to sell you something – let’s just say they might not have your best interests at heart. Spanish Property Insight is the only independent source of information and analysis of the Spanish property market. Don’t even think about buying or selling property in Spain without subscribing to Spanish Property Insight.
I was surprised to read that undeclared cash payments, known as B or en negro (Black Money), are still prevalent in Spain, according to an article in the Spanish daily El Mundo. I thought they disappeared with the boom.
In the past, including the boom years, under-the-table cash payments were a feature of many property purchases in Spain, at least in the resale market (far less so in the new home market). Many foreign buyers were horrified, but it was cash or no deal.
With a big black-economy (thanks to high taxes and bureaucracy) there was plenty of cash sloshing around, and property was a great way to hide it – one of the factors that helped inflate the bubble. But most of all, undeclared cash payments reduced taxes for both buyers and sellers – lower declared profits for vendors, so lower capital gains, and lower ITP purchase tax for buyers. The big loser was the Spanish treasury, which could have collected more tax by reducing tax rates.
How did it work, given that all property transactions in Spain have to be witnessed by a notary? With buyer and seller gathered in the notary’s office, once the declared payments had been made, and the deeds signed, the notary would leave the room, and the buyer would hand over wads of cash to the vendor. Tens of thousands of Euros often changed hands this way, and notaries knew very well what was going on.
But the property bust, and stricter controls on cash, put paid to the practise. Crashing prices wiped out capital gains and reduced ITP, making cash payments less attractive for both sides. Indeed, prices fell so far that many buyers were hit with what I call the ‘bargain-hunter tax’ – a type of fine for paying too low a price. How ironic that when buyers stopped paying in B-money, the tax authorities started fining them on the presumption of having done so.
Stricter controls on cash
Stricter cash controls against money-laundering and financing terrorism have also made it much harder to deal in cash. To change just one 500 Euro note in the bank today (commonly known as a ‘Bin Laden’, and the favorite denomination of property dealers back in the day), you have to provide your identity documentation. You can’t withdraw or deposit significant amounts without justification. So unless you want to keep lots of cash under the mattress, B-money is more hassle than it’s worth.
But now house prices are rising, and with transaction taxes are higher than ever, the incentive to return to cash payments is getting bigger. Even so, I was surprised to read in El Mundo that black money “continues to be very prevalent in the purchase of homes”. I looked into it a bit, and found no evidence of this. Undeclared cash-payments are “very, very residual” says Guirfé Homedes, International Director of Amat Immobiliaris, a real estate agency covering Barcelona and its surroundings. “They disappeared from new home purchases years ago, even before the boom, and in the resale market you now rarely, if at all, hear of them, at least in this area.”
So despite recent headlines in the Spanish press, I think you are unlikely to be asked to pay a percentage in cash under the table if you buy a home in Spain today, and certainly not if you are buying a new Spanish home from a developer. And if you are asked to pay in cash, refuse or walk away. It’s not worth the hassle.
Everything you need to know about property in Spain
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