Reply To: CAPITAL GAINS TAX & PRICE QUOTED IN ESCRITURA

#218992

KevinXativa
Participant

Hi Bonehead

Thought I would follow up on your comments, and try to cast our minds back to the late nineties early noughties.

Throughout that time period Spanish property prices, like elsewhere, were rampant. I bought a property on Costa Blanca in 1996 and sold in 2003 and the price had gone up 250%; with no shortage of buyers (by contrast the property I then bought in 2003 will probably now sell for a net 30+% loss if I can find a buyer).

Also at that time non-resident owners were charged about double the rate of CGT as resident owners were charged. This meant a non-resident seller faced circa 35% tax on what were very healthy profits. This was only changed I think around 2007 when Spanish Gov was taken to European Court of Justice and told they had to treat all EU residents the same.

The Spanish attitude to tax, and other regulations has always been at odds to the British attitude. We Brits shrug our shoulders and pay what we are told to pay. Spanish (along with Greeks, Italians, etc, etc ) more often look for ways round the rules rather than just pay. Since the crisis of course some attitudes have changed, but not entirely. Its maybe for another forum to conject, but one wonders how much tax revenue has been lost in Spain/Greece/Italy etc due to the Black and White syndrome.

So when you bought your house in 2005, the attitudes were different to nowadays. Selling a house in 2005 would without question have meant the seller, particularly if non-resident, having a very large CGT liability and the seller may only have wanted to sell to a buyer that understood there had to be a large chunk of Black cash.

You don’t say what the difference in values are between your purchase price and escritura but 40% upwards was quite usual. And remember that if your purchase had been done ‘correctly’ you would have paid 10% on the black amount as purchase tax. So you have, inadvertantly, avoided paying what could have been some €000’s more in tax.

I am very surprised that your solicitor seems to have left a trail behind. You say you can show you transferred the total purchase amount to him, and you think he then took it upon himself to pay the black money. Although my knowledge is very limited, I find that amazing – not that I am doubting you, just voicing my surprise at your solicitor leaving this trail – but my own experience, and of others I know who purchased at similar time, was we had to go to Notary with our own cash.

My view is that this is not a scam. It was very common and accepted practice from which you also had a benefit along with the seller. Indeed you may have had an ongoing benefit by paying lower catastral tax often based on Escritura value. Can you do anything about. I would suggest asking your self if you really should, after all it is now 12 years since the transaction, if the Escritura value concerned you why did you not raise it earlier.

And ulimately if you do pursue it, albeit I am not at all sure how you could, but you would then end up having to pay the backdated purchase and catstral tax. So whatever your current CGT liability is, you may ultimately actually not be out of pocket.

regards