new buyers in spain

Hi there

can anyone offer me advice on this.  We purchased re-sale house for 260,000 euros, paid 3000 euros deposit. Have heard from our solicitor today who states that sellers deed price in 2001 was 90,151.00 euros and have asked us to say we are buying from them for 210,000 euros. On our purchase contract it says the sellers will pay the increase on land value(plus valia), What should we do, how can we be sure they will pay this not us. We are not planning on selling this for a few years so is it worth the risk.  Any help as soon as possible, have to get in touch with solicitors tomorrow.

thanks

jean

This is 'Old Spanish' pre Madrid!!!

Some call it 'black money' situation

In todays world.....and everyone on this forum will say the same!!!

The price you pay must be the price on the contract.....[UK] ...deeds.....what you own!!! 

It may be the 'dream home' ....but they can turn ' nasty' if you do not buy it right in '2007' onwards

I ask the question?.....would you do it in UK..........Spain & UK are both EU!!!!

If you want to talk it out e-mail me......and there are always alternatives,,,,,,,even to the 'Dream Home' in Spain

If urgent tel is 01625 502391 M 0777 557 8230

When I purchased my resale home I thought the solicitor had brought in his sandwiches as he was too busy for lunch.  Then I got called into room and found out the sandwiches were 42k in cash, which needed to be counted by the sellers representative before we could proceed further.

The house was registered for a third less than I paid, I got a couple k back from solicitor because I hadn't paid as much tax because of this.  But as a non resident when I sell unless the same thing happens then I will pay more tax as it will be a capital gain (if I'm lucky)

If you're a resident then you wouldn't pay CGT if it's your main residence so really it depends on your situation.

Also are you buying through an agent, if so their fees would need to be deducted from what you are paying to find out exactly what you are paying for the house.  The difference may not be as great as you think.

The local governments are trying to phase out the black money situation as they are loosing money in collection of suma, in Torrevieja they have been increasing the registered value of properties to bring them all into line. 

My neighbours who bought 2 years after me had to pay extra tax as their property was registered too low, although when I spoke to the previous owner they hadn't had to pay any extra tax.  So go figure, I suppose that's another example of "this is Spain we do things differently here".

I have had the Plus Valia tax explained to me and it wasn't as much as I thought it was going to be, it's the CGT that is costly although that had now been reduced to 18%.

I hope I haven't confused you further with the above information.

If I was buying now I would want to know exactly what I was paying the seller and would want the declared price to reflect that price.  Talk to your Solicitor and see what they think.  They know how to calculate what it is going to cost the seller to declare the correct price, it would be interesting to find out what the difference is between the two declarations.  Compare it with what it's going to cost you (difference between 7% and 18%) and then you can decide if it's a deal breaker or not.

Hi Tpau,

The vendor should always pay the plus valia and the simple way to enforce this is to make sure it is the contract.

Let's be honest here guys and do a quick survey,how many people on this forum who have bought property have not paid black money for their property,i would guess at not many.

It happens,it will always happen and we,the builders,the buyers and the government will never eradicate the cash system here in Spain,you can of course refuse after being made aware of the situation and if you have a good solicitor they will always give you the choice,the difference at present is that the percentage of black money is decreasing.

The reason people will always do it is because 7% has to be paid to the government on the sale price and if you reduce the sale price the vendor and the buyer pay less tax.

Rowlandsb,i notice you are not in Spain but seem to sell property here,if you have never had a client that have paid black money then you can't have sold a great deal of property.

Yes Spain Is in the EU which gives freedom of movement for all citizens but the Spanish system still insists you apply for Residencia. I am afraid the double standards apply throughout the Spanish System and just because you would not do some things in the UK make no difference,you are not in the UK!

At least once in everyones life they have paid cash for something to get a better deal,whether it be in Spain or the UK.

I do not encourage black money it is a decision that you will be asked to make by your solicitor you can guarantee that.

Do not get me wrong,Black money is illegal and tax evasion.

What i am trying to say in this post is,lets be honest about it.

Regards

Georgia

All I am saying is that it is on the way out

Still being paid although when I personally buy I will not pay it and have no problems

Certainly it is mentioned and will still continue to be paid  for some time but after Madrid even the Spanish had to start to get their house in order 

Banks more strict, passport numbers required for everything and Spanish Tax people sharing data with UK Revenue & Customs

Large Increase in  the Task Force in  Spain to stamp it out and to chase up owners who do not declare this and rentals

Black money economy exist everywhere but it has been stamped out in UK for property and in due course the same will happen in Spain....it is very easy to do when property is registered on sale......simple desk top valuation software can high light potential abuses and if you employ enough people you can stop it!!

This is good for the future property market in Spain and will bring back buyers confidence .....nothing worse than seeing the black money process on TV!!!

And if asked for advice , then it has to be ' do not pay' it as eventually you will end up paying the previous owners Capital Gains Tax

But the client makes the decision and some want to pay it 

In the current market very few developers or vendors will walk away from a sale if you refuse black money

Hi georgia

Thanks for reply.  I am just a litle nervous about this black money thing knowing they are cracking down on it.  I think like you say everyone or most people do this, so am going to do same.  We are planning on retiring out there in 2 or 3 years,  If we should one day decide to sell this particular property it would be to reinvest in another within spain, so i hear maybe they are more forgiving if you are doing this.

jean

As long as you apply for Residencia when you move out to Spain and don't move for a set period then you won't be effected.  Any profits you make on the house you can keep as long as this is your main residence, same as UK.

Once you reach retirement age then after 2 years if you decide to move back to UK you can also take the money back tax free.  This is all explained in "You and the Law in Spain.

I've never had to pay further tax on my "black money", yet my neighbours did 2 years later.  May have been because the same amount was declared then and because house prices were going up then it was decided to up amount.  As I said only the buyers were effected not the vendors who still live in Spain. 

My understanding is that everyone who sells has to leave a percentage of the declared? value with the solicitor to pay the taxes, but that's another story.

If you are happy then pay the tax. Afterall this is Spain and we do things differently here.

I am just talking about CGT which is mainly why people want to under declare the value.  You will have to pay plus valia when you sell but that is much less than CGT.  Read the above book, recommended to anyone who is thinking of buying in Spain.

Caution!

When I bought mine some years ago, the "black" money was the done thing (so I was told).  It has taken me nearly 5 years to get the deeds (still haven't got them) but I have been warned by the solicitors that, when I do get the deeds, the correct sum I paid must go on them.  I will have a bill for an extra €4,000 to cover the difference in tax between the declared value and the real value.  Personally, with so many good value resale houses on the market, I would now avoid anyone asking for up front money to avoid possibe taxes (and fines) in the future.

My new house (ready next year) has the full value declared on the contract with no "black" money.

Of course, if you really love the house and there are no alternatives, you could go for it and take the chance.  Just make sure you have the money to cover the difference if necessary.