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Buying Spanish Property – Are You A Fraudster And Didn't Know It?

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Purchase price and declared amount

It is common practice in Spain to under declare the sales price of your property. This practice is very much against the law and should not be entertained – it is fraudulent because you are defrauding the tax office – which carries a prison sentence. However many Spanish Owners will not sell you the property unless you under declare. So what is an honest citizen like your self to do?

What is black money?

Black money is the difference between the declared price and the actual sales price. So if you bought your property for Ђ100,000 and declared Ђ80,000 the black money element would be Ђ20,000. The reason why it happens is because the seller is liable to pay upto 35% of the profit as capital gains tax and the buyer pays taxes based on the sale price – so in effect both parties gain – don’t they?

Well current EU Directive means it is now being clamped down on hard. In my local town of Oliva they have started fining people –everyone who has bought a property in the past 5 years is deemed to have under declared by 20% so they are charging accordingly. So whilst you may gain short term you will be caught out in the long run and it will be you who has to pay the price not the seller.

So what if the seller refuses to sell unless Black money changes hands.

Personally I would walk away.

However you may well lose the sale. It is possible that as it is a buyers market currently this will be enough to persuade the seller that it isn’t worth risking losing a sale. Your estate agent will encourage you to agree because they may have agreed with the vendors that their commission on the sale will be paid in cash taken from the buyer during the sale.

If they still insist then at least get a solicitor to draw up a legal document which states that the seller is liable for any taxes on the undeclared amount and that the agent is persuading you to complete the transaction not declaring the full amount. However this may be difficult to enforce as it is actually encouraging breaking the law so I doubt if a court would find in your favour.

Or you could just risk it and hope you won’t get caught out – but be aware that this is a criminal offence and all parties are effectively liable – the seller up to one year but ultimately it is you who will carry the can.

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