Tax evasion on property transactions and rentals

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    • #53040

      There is an interesting article in Sur this week (20-26 July)
      (see page 3 of PDF version) on a clampdown on property tax evasion including under declaration.

    • #73675

      Going slightly off topic but..
      A few weeks ago, they quoted a figure of around 450 million euros tax lost from overseas owners renting out their homes for short term holiday breaks thus making it difficult to clamp down.

      Nobody’s condoning tax evasion and I’ve no idea if these figures are accurate but these types of stats always fail to take for granted the following;

      They assume that everyone would carry on renting and start paying the Spanish tax when in reality a large majority would come off the market as it wouldn’t be worth the hassle for many after maintenance, laundry and cleaning were taken out

      They assume that if all those properties were unavailable, holiday makers would opt to stay in a hotel instead whereas in reality most would rent a villa or apartment in Italy, Florida, Croatia or Turkey and spend their overseas currency at the shops and restaurants there instead

      What affect would that have on the Spanish tourist industry?

    • #73676

      Personally I am in favour of a clamp down on tax evasion, because if all paid what was due, those who do pay would not have to pay the high cost to subsidise those who don’t.

      So are you saying that although I want to visit Spain, I will fo to Florida instead as a villa may be e few dollars cheaper. Come on, be realistic, if I want to go to Spain then it is Spain I will go to.

      “They assume that if all those properties were unavailable, holiday makers would opt to stay in a hotel instead” and I agree with that, either hotel or regulated villa letting.

      “What affect would that have on the Spanish tourist industry”
      Possibly improve greatly. If something isn’t done to control private lettings, the hotel operators will fight back and flood the regions with All Inclusive offers, which means th local bars, cafes, restaurants may as well shut up shop now.
      Take a look what is happening in the Canary Islands.

    • #73677


      i agree everyone should pay their taxes, but i don’t think many even knew, or were not told about it by their agents?, and so when making a decision to buy would not have taken this in to account. What with this and all the current problems in Spain driving down rental prices along with high maintenance costs, as often only a small percentage either own or are prepared to pay community charges, tax could be the nail in the coffin. It would be nice to see government at all levels chasing the real crooks we all know about, before hitting those who are already having a tough time.

    • #73678


      Real crooks being caught and penalised. I agree with that.

      People who get an income, be it earned, un-earned, shares or investment, didn’t know they would have to pay tax on the income, sorry, can’t agree with that one.
      That is the excuse offered to many when making claims on the State (didn’t know I had to).
      Ignorance of fact cannot be accepted as an exscuse.

      Are you saying that there are buy to let operators in UK that don’t know they have to pay tax on income?
      I think it is a case of not wanting to know.

    • #73679

      All I’m saying is that with stats they make assumptions. If someone gives you the tracks off an EMI album at work, the stats say the record company’s lost say £12 to piracy ( and the government 17.5%) as it is assumed you would have gone out an bought the album

      What is the non-residents tax for those who rent out their home? Would prices go up or would people not bother renting?

      I actually think if you have a good property in the right location, present it well and market it professionally, you can offset a lot of the tax in extra rentals. In reality none of the above apply to many.

    • #73680

      Until the Spanish Tax authorities dont start treating residents and non residents equally/same in terms of expenses that can be written off against the rental income they will continue to lose revenue from non residents and futher where there is refund due this has to be done within a reasnable time.

      A Spaniard renting a flat can offset interest, service charges, cleaning etc. A non resident will incur the same expenses but is not allowed to off set. This is clear fiscal discrmination.

      Until such time the taxes are not set out to be fair and are seen to be equatabily distributed for the benefit of its citizens. The evasion will continue to take place.

      The taxpayer will alwa

    • #73681

      Every tax form I have ever filled in , from time immemorial, has inquired about unearned income and other properties one might have anywhere in the world.
      Appreciate one might assume one didn’t have to pay Spanish Government but then because of the dual taxation it is deductable when you acknowledge it on you UK tax form.
      Glad those who have tried to scam the system are going to be caught at last.

    • #73683

      Hi Everyone,

      I’ll declare an interest here. I run a guest house. I’m totally legal.This means I have a licence from the town hall, am registered with the provincial tourist authority, pay social security and am registered for IVA.

      It is quite clear that all of us in the “hotel” industry are losing business to the private rental market. The authorities are aware of the problem. Only today there was an article in El Mundo talking about this.

      The Junta are saying that this is a problem for the revenue, not the tourist authorities. This is a convenient kop out for the Junta as unfair competition clearly falls within their control.

      As of 11 July had 6547 properties advertised in Spain. That’s a lot of illegal competition. Goodness knows how many
      Spanish owned pisos y chalecitos are offered at this time of year. But it must run into many thousands and thousands. The total of foreign and national owned private lettings clearly amounts to an awful lot of beds.

      I’d bet my last dollar that many people who work for the Junta have properties they rent illegally. I know employees of my local Ayuntamiento who do this.

      The Spanish internet site I use for attracting the national market has a forum. To advertise on this site you have to be legal. It is full of commentaries from owners about “competencia desleal”(unfair competition).

      Apart from the issue of unpaid tax, I believe the more relevant strategic issue is that too many beds chases prices down and lowers quality. This is a mistake. Spain does not have the same cost base as Morroco, Mexico etc. so it is pointless to compete on price.

      What the tourist sector in Andalucia has to do is to compete on quality and differentiation. That means targetting specific markets such as health, golf, outdoor activities, conferences etc, alongside the established sol y playa market. It also means effectively policing the private rental market.

      The Junta know this. But heads seem to disappear into the sand when it comes to pulling the public (voters) into line instead of supporting the professional tourist sector.

      I guess I’m a lone voice on this issue but it’s good to get things off your chest!



    • #73684


      Although I am in no way involved in the rental or hotel market, I have great sympathy for anyone in any business, who sets things up professionaly and by undercut by the tax dodging fly-by-night, I’ll rent it cheap, I’ll taxi you cheap, brigade.

      “It is quite clear that all of us in the “hotel” industry are losing business to the private rental market” As it was in the Canaries and now the hoteliers have fought back with the AI, the Government complains that small businesses are suffering, when they are the very ones that allowed the illegal let market to grow.

      “The Junta are saying that this is a problem for the revenue, not the tourist authorities.” – Yes, they all blame others and wait until it is too late.

      “The Spanish internet site I use for attracting the national market has a forum. To advertise on this site you have to be legal” – Pity such a regulation didn’t apply on the villa rental sites.

      “quality and differentiation” – Can’t argue with that.
      “That means targetting specific markets” – That could be the costly one.

      “effectively policing the private rental market.” – Now that is what is required to sort things out and protect the legal businesses and operators.

      “I guess I’m a lone voice on this issue” – Maybe, but you do have a supporter here.

    • #73685


      Thanks for the support. Much appreciated. I wonder what the situation in Florida is with private rentals?

      It would be so easy for the Spanish Revenue to look at the main internet sites or villa operators with their flash brochures. I believe the British Revenue do this. And I know from friends in France that the guys at the Hotel des Impots are very hot on this.

      I’m not bothered about competition so long as we all start from the same base. Here’s a small example. I pay 300€ pa for rubbish collection because I have a business. Someone operating illegally will be paying 50/60€. And then there’s social security at 249.60€ per month, IVA returns … you get the picture.

      Even though the illegals are a pain in the privates, the tourism industry has been made much more complicated with the world getting smaller as airline fares drop. Choice and cost accessibility are greater than ever before.

      To survive as an independent you need to be in a specialist sector or a honeypot location but they tend to be a bit pricey. A 400sq.m house in Venice is just a tad beyond my means!

      At least the sun is shining, the Bar Cadiz is but a short stroll up the road
      and I have a room taken for a couple of nights.

      Time for a Cruz Campo(s) y una tapita.



    • #73688

      Melosine: I find your posting confusing. Are you a Spainsh resident ? If yes than you will be taxed on your world income the same if you were a tax resident of UK.

      Irrespective of your tax status the tax is payable where the property is based. So if you were Spanish Tax resident and the property is in Spain you pay Spanish taxes and like other residents you will be allowed to deduct your expenses.

      However if your property is in Spain and you are a Uk tax resident. You pay a flat rate to the Spanish and when you do your UK Tax return calculate the tax due and reduce/offset the amount that you had already paid to the Spanish.

    • #73689

      Someone mentioned Florida, never underdeclare anything there or they will not let you in again if theyfind you are not paying taxes. They are more on the ball than Spain,,,do you think the spanish declare rental income down here on the CDS…Nah.

    • #73690

      Sorry if it was confusing.
      My reply was actually in response to Goodstitch ,who is a UK resident, and even if the agents didn’t mention tax implications to him when he thought about buying a second home here , certainly as a businessman , he must have known that at the very least he would have to declare the property , and any income from it , to UK IR.
      The tax form for a non resident is easy to fill in and any monies due can then be deducted from UK IR because of the double taxation agreement.

      Yes, I am a resident, and am aware that, as it always has been in UK, assets world wide have to be accounted for.

      Unfortunately many still think and have thought in the past they could dismiss assets in foreign countries because tax offices wouldn’t find out. Well ,the UK IR have had the means to do this for at least the last 10 years. Now with self assessment they will pounce…make no mistake.

    • #73691

      Melosine: Noted it was in responce to goodstich: I am not a fan of estate agents & have not used them, but do feel that it is not their remit to state various aspects of the society that one wishes to buy. However I do agree that if a prospective buyer ask a question it should be replied to best of the agents knwoledge.

      I have used agents in the past to show me around and learn from them their knowledge but dont buy from them. I dont have any qualms about it.

    • #73692

      If the Spanish Authorities want to clamp down on tax evasion they should look ‘at their own back yard’. We all know that selling property to Brits is the end game of money laundering from drugs, trafficking etc. In other words, by selling a property you are able to exchange dirty money into clean money with no questions asked. It seems the authorities are happy to ‘put their heads in the sand’ over this one! 😯

    • #73695

      So does that make tax evasion OK then?

    • #73710

      mg: In Rome do what the Romans do. The whole of Europe drives on the right and we drive on the left. Does that we are doing some wrong or the whole of Europe doing something wrong ?????

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