June 15, 2007 at 12:09 pm #52952
Seller doesn’t want to pay CGT and wants to underdeclare value – therefore wants cash under table!!
Laywer has advised this is illegal and we’re not to agree.
This of course could break the sale but, at the end of th day, we’re paying the lawyer for good advice!
We realise this kind of thing is rife when buying in Spain – BUT – what to do? We’re inclined to refuse to do it as advised. Anyone got any ideas?
June 15, 2007 at 12:18 pm #72986
Take your Lawyers advice. The authorities are clamping down hard on black money due to money laundering.
June 15, 2007 at 12:21 pm #72987
Besides being illegal it goes against your financial interests, paying in cash is as if you were in fact paying the vendors taxes for him.
If the sale falls, let it do so. Plenty of other deals.
It is not “abolutely normal/rife in Spain” anymore for the last couple of years.
On top of all the above a fiscal inspection will be started by which you will be made to pay the value market difference in taxes to the Tax Authorities.
June 15, 2007 at 12:25 pm #72988
Also you will lose when you come to sell. A good post explaining all was posted by ‘Truthbites’ earlier this year:
Although “black money” does still happen, it is nowhere near what was happening years ago. In previous years up to a mind boggling 70% of the property value could be paid in cash and only 30% declared on the escritura. In todays market the vendor will be lucky to get 5% of the property value in cash as no buyers now want to pay in cash.
Very Simple Black Money explanation:
What happens is you buy a property for 100 €, you declare 50 € and pay 50 € in cash. You pay 10% purchase costs so you end up paying 5 € instead of 10 €. But when you come to sell it, if you sell it at 150 € your declared capital gains tax (CGT) is based on 100 € gains instead of the actual 50 € gains.
At 18% CGT you end up paying 18 € instead of 9 €
So in the long run you save some € when you buy with black money but end up paying a lot more € than you saved when you sell. All this while running the risk of getting caught doing something illegal. Just doesn’t make much sense and buyers are starting to catch on. Unfortunately many paid the hefty black money when buying and now literally can’t afford to sell and declare the full amount because they would lose money.
And while it was and is still going on a lot, at least on the CDS it is frowned on and the more serious agents will refuse to have anything to do with it.
June 15, 2007 at 12:30 pm #72989
Thank you to all who took time out to respond to my post. You have confirmed our thoughts, not to mention misgivings, on the matter, just say no and keep our fingers crossed and hope the sale goes through.
June 15, 2007 at 2:35 pm #72991
Given the choice of having a buyer who is not prepared to deal in black money or being left with no buyer, I know what, as a seller, I would go for!! Be interested to see if another “buyer” suddenly comes on the scene to try and force the issue! Don’t be bullied, it sounds like a buyers market from the comments everyone makes about falling prices etc…
June 16, 2007 at 9:51 pm #73018
I would also suggest you keep a copy of your private contract for future reference because the authorities are clamping down hard and now are assuming that everyone is paying black money and it is up to you to prove otherwise. If you have your private contract, plus ALL payments whether made in cash or not then you should err on the side of caution.
Incidentally it isnt just sellers who want black money. I recently sold my own house and the buyer wanted to make a cash payment. I basically told her whatever money she paid me would be declared anyway – she threatened to go elsewhere (no problem hd 15 others queuing up and for the price I sold it at you coudlnt buy an apartment half the size) – she eventually relented
so the moral is stick to your guns. It is Fraud and therefore completely illegal. Your lawyer is (surprisingly) advising you well so take his advice. In todays market there are plenty more property where the owners will accept everything in declared money
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