I.V.F. and completion

can anyone help, we have bought an apartment off plan in spain. the cost is approx 100,000 euros, we have paid 75% up till now  and have to pay the other 25% shortly when we complete. we have been told that when we pay the other 25,000 euros that the builder will probably ask for a bankers draft of 15,000 euros and the rest in cash, and that when we sign the deeds the builder will declare the property price as 90,000 euros ie 75,000 already paid plus 15,000 euros  from bankers draft and pocket the 10,000 cash. apparantly this is a common practice is spain. what we want to know is if the apartment price is declared as costing 90,000 euros when we have actually paid 100,ooo euros then are we only liable to pay 7% of the I.V.A. on the 90,000 euros and not on the 100,000 euros. Any replies would be very much appreciated. I

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This unfortunately is what they call dark money and is (as far as I'm aware) illegal.

It is aimed at saving you money because you only pay tax on the declared monies.  Although on the face of it it might be saving you money (i.e. you would not pay tax on the 10000 cash), the problem is that in the long term, if you decide to sell up and it is your second home or holiday home, the Capital Gains Tax you pay is often calculated by taking the initial declared value (i.e. 90000) and the sale price.  So you would end up paying 18% (was 35% last year) on the 10000 and not 7%.

I'm not an expert and you probably should seek advice.  I don't know if smiley can help perhaps?

Regards,

Steve.

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This message was last edited by JeansSis on 5/16/2007.

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HI Formentora both Redman and JeanSis are right - dont do it - tell your brief you want to declare at the real price - yes you save the IVA now but then you have the CGT later. If the Land Registry suspect conspiracy to defraud they will tell the tax office who in turn will do their own assessment and then demand payment of the previous owners debt from you as the charge now lies on the property (which is yours) they can insist on payment within 28 days and there will be a further 20% penalty. Also check that the builder pays the PlusValia - a tax on the increased value of the land since he bought it. Spookily enough it can sometimes be forgotten. That applies to any property in fact and any purchaser should ensure they check the vendor deals with it not the purchaser unless previously agreed. 

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Our lawyer told us of a recent case where people were arrested at the Notary´s Office when they tried to complete on a property purchase with a percentage of the money in cash.  Beware!

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This message was last edited by JeansSis on 5/16/2007.

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