April 24, 2006 at 3:03 pm #51752
As people will know from viewing this site I am trying to sell my house in Villa Blanca near Ayamonte. A prospective purchaser has come forward and offered 200,000 euros, I paid 180,000 euros so after careful thought said yes and am quite prepared to pay 35% capital gains tax on 20,000 euros. Now for the crunch, I sent the escritura across to the agent and of course the deeds were all in Spanish and when they were translated the declared value of the property is only 113,000 euros. I new nothing at all about this under declared value and was most surprised my lawyer never picked it up. Now of course I have a mammoth problem as I have to pay capital gains tax on the difference between the declared value and the selling price which means I now have to pay 35% of 87,000 euros instead of 20,000 euros which means I will be selling the house for less than I paid for it. As you can imagine I am not amused and would like to ask any lawyer out there is this under declaring the value of property standard practice in Spain and if so WHY. Is there anything that can be done to reduce this tax.
April 24, 2006 at 7:58 pm #61840
Sorry I’m not sure if I misunderstand your post, but am a little confused as to how you could not have been aware that the property was underdeclared when you brought it?
The whole point of underdeclaring is that the seller pays less tax, both in capital gains tax and Spanish sellers have to declare the sale as part of their total yearly earning so get hit twice, not sure about UK ones..
So the buyer pays the “declared value” by bank transfer or cheque and then pays in cash to get to the actual purchase price, which is why I can’t see how you could not have known about this..unless of course you just transferred all your money to your lawayer who then paid for your property as I’ve described above!
This practice is routine in Spain.
When we brought our house, last year, we were told by our surveyor and lawyer that it was unheard of to buy a property here without there being a “brown envelope” involved. We did try not to pay the black money part but the sellers threatened to pull out and so we paid…but the notary must have known what was going on as the estate agent had given them the full price and then I was with them when this was amended at the notaries!!! Some areas are cracking down on it, and there are various threads already on this forum.
Unfortunatly, the obvious way to reduce your tax would be to join in the game and underdeclare your sale too…I guess it depends on how ethical you are feeling!
Good luck with your sale,
April 24, 2006 at 8:02 pm #61841
Standard? NO, common? Unfortunately YES, legal? Definitely NO.
In short: a FRAUD… Why is this done? Simply to avoid paying taxes… Why is/was so commonly done? Among other things because in the past years there was a high demand and a limited supply in housing so when approaching a vendor you had to fulfill his requirements in the way of payment which, in most cases, implied paying part of the price in ‘black money’ to prevent a high tax rate… vendors, buyers, REAs, lawyers, Notarios, everyone is involved in this kind of malpractice… it’s frustrating how often I have to fight to avoid things like this and what is worst… how many times I have to do it against my own clients!!!!
I’m afraid your problem may be worst that you think as you may have also committed a tax fraud without knowing it…
Because… Which tax base did you use when you paid your taxes related to the purchase??? The true price you paid for the house or the under declared value stated in the deeds???
Did your lawyer/other person purchase the property on your behalf with a Power of Attorney? If so, you have action against him/them. Did you sign the deeds personally before the Notario? If that’s your situation I’m afraid I see no ‘legal’ excuse. Not only you’ll be paying a high tax rate now but also you may be liable to pay a severe fine if you bought your property less than four years ago.
‘Dura lex sed lex’ as they said in ancient Rome.
April 25, 2006 at 8:56 am #61848
I purchased the property off plan. Four years ago I put down a deposit and over a period of 3 years paid another three installments until the villa was completed last year. I then went to the Notary with my lawyer and signed the deeds in front of the notary but unfortunately my lawyer who is English but speaks fluent Spanish did not translate the deeds and I trusted him to make sure all was OK. I actually paid IVA of 7% on the full asking price of 180,000 euros so I have paid all the taxes I should have but am now wondering who pocketed the difference. Probably the only way out now is to hand over the 5% retention fee and leave the country before paying the capital gains tax as the retention fee would be 10,000 euros whereas the CGT would be 35,000 euros.
April 25, 2006 at 11:11 am #61856
Did you make any of the payments in cash, in particular when making the final payment at the notary’s office?
April 25, 2006 at 12:25 pm #61857
Whom did you pay the IVA 7% to?
Did you fill the tax form by yourself? Do you have the official receipt? See if it is attached to the deeds. Check if it says tax base 168.225.00 Euro, IVA paid 11,775.00 Euro (that would make the full 180,000.00)
April 25, 2006 at 12:43 pm #61858
Mark, Cesar, Thanks for the reply. The estate agents I purchased off plan from were Superior. I had to pay 180 000 euros in four installments and with each payment I paid 7% IVA to Superior. I still keep all the documents appertaining to the purchase. I have no idea if Superior gave the IVA to the relevant authority but I can prove I paid the full 7%iva to the estate agent. Now I am wondering what Superior did with my money, did they pocket it. I never signed any tax forms, when I went to the notary with my lawyer I foolishly signed the deeds without getting a translation first. I never paid any money in cash, the final payment in the notary was a bankers draft.
April 25, 2006 at 4:15 pm #61862
Phantom, these agents were mentioned quite a while back in a negative way. I do not know if it was you who posted about them. the person who did the post went about it in a convoluted way so as not to actually name them.!
April 25, 2006 at 7:20 pm #61869
Yes Claire it was me and I would never deal with this outfit again and advise other people to be on their guard if associating with them.
April 25, 2006 at 8:00 pm #61870
I think we should find a “medium” where we can name all of these dreadful people /businesses. Also one where we can name the tried/tested/trustworthy ones. We could call that one “The TTT Zone” Any suggestions for the “name & shame” site? 😉
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