Here you go Smiley...

Hi Gillespie,

You can tell you have been on holiday!

Very informative as always.

Regards

Georgia

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Thanks georgia,

I´m feeling very refreshed and already two apartment sales in the bag plus hopefully a nice big villa today.

Back to the thread, I thought as smiley did a great job to get Justo to create the thread, it is only right to explain that the black money aspect is not there as a con , newbies need to know this.  yes both parties gain, but, it´s a loophole that allows it and nothing more sinister than that usually.

The same thing happens in the UK on a smaller scale.  If a UK house is for sale, say 25k over the stamp duty thresshold, then it is not uncommon to pay cash for i.e. the carpets and curtains (usually at a vastly inflated value) so as to bring the price below the stamp duty barrier, saving the buyer 1%.

Black money in Spain is a similar thing, it just stops Spain equivelent of his Gordoness getting his filthy share of the loot!

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Gillespie said:

"If the government is to stop black money, then it will need to legislate that all contracts are only legal if produced by the notary.  I think this is how it is now done in France, but it has really killed the French property market for the last 4 years."

Whilst it is true that all French sales are conducted through a notary, this has always been the case and is nothing to do with the sluggish performance of the French market.  In most parts of France, the English are the main foreign investers, whilst the Germans, Dutch etc. only make up a small minority. This leads to a slow, but more  stable market.   Spanish properties however, tend to sell on a more global scale and the Spanish themselves are amongst the highest % home owners in the world.

I have bought and sold property in France and I am convinced that it is the easiest and safest system.  The Notaries do everything for both sides and are well covered by insurance if they make a mistake.  Lawyers do not get involved, so saving lots of money and the potential for corruption. Notaries are more trusted in French society than any other profession and any whiff of corruption causes a major scandal unlike UK/Spain where we expect lawyers and politicians to be corrupt.  An honest politician is one who simply hasn't been caught yet !!!!

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jmtwsm,  Although there are less cases of corruption in the French property market, they still frequently occur. Nothing like on the scale of Spain, but then house building is nothing like the scale of Spain. 

I sell houses in France too, not many but a few a year and black money still occures.  A small town French notary is always going to ensure a local French property owner gets an amount of cash in some way.  It happened to two very good friends of mine in seperate instances when the vendor suddenly added to the price. The notary squirmingly explained the reasons behind this and cash changed hands.

There are corrupt noataries everywhere, and as you say only when discovered.

I like the Spanish system, it´s fine, no worse, no better, just different.

The French market is slow, and mainly attracts a different kind of buyer, it´s the sheer size of the Spanish market that attracts attention when it dips,  I was a part time freelance journalist at the time of the boom in 1999 and that brought me to Spain to do an article for a Mag, the editors couldn´t get enough of it.  Now there is a dip, the editors can´t get enough of that either, and let´s face it, they love bad news, alarmist stories and covering a story where a poor nieve buyer loses all!

If I was still a freelancer I could probably make more from my grim over emphasised bad luck articles than I did selling property in the boom.

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"The rule of thumb is "valor catastral y poco mas"  a little more than the absolute minimum." 

"The last review was (i think 2004) not too sure."

I think (but cannot be certain) that both these comments depend very much on the "where". For example, the last review in my area was 2002 - which did cause me to find myself landed with an unexpected CGT bill on one sale.

As for the "rule of thumb" you gave - again, in my area, the unofficial general opinion is min. 2.5 x valor catastral. Any less would be ridiculous. For example, my 4 year old 2 bed 2 bath apartment has a VC of a little over 40,000€. Market value is probably more like 250,000€ (at least, I hope!) If I had only declared un poco mas de valor catastral, I could be facing a potentially disastrous CGT if I wanted to sell now.

It is my understanding that VC refers to the value of the land on which a property stands (on which the rates are calculated), rather than the value of the actual property in its entirety.

For anyone who is wondering, both the valor catastral and the year of the last review can be found on your last IBI (rates) receipt. 

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Personally, I think Black  Money will be around for some time yet. I was offered a Villa just the other day and the Swiss owners were asking for nearly 30% of the sale price through a private contract! theve owned their property since the late 70's and are looking at a large capital gain. Its hard to ignore the fact that fortunate investors whove purchased in spain prior to 2003 may well be sitting on a handsome profit and you can't blame them for trying to save on CGT, its just the way of the world isn't it?

To many ordinary members on these boards Black Money may well be an irrelevance as the majority will be Off Plan buyers where its highly unlikely they would be effected in the short term and may well wonder what we are all on about?

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Correct me if I'm wrong (anybody?) but if they've owned it for over 20 years there should be no CGT?

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I did ask that question Rob.

I think a lot depends on where your declared residence is? For instance, if you live in the UK and your property in Spain is classed as your second home, you would probably still be liable to Uk CGT regardless of your actual tax status within the Spanish tax system. You would of course receive a tax credit for any capital Gains tax paid in Spain. If you are a declared resident in Spain and you still own in the Uk you may also have a liability to declare in Spain if you sell your Uk property?

It can be a tricky predicament and it helps if you have a friendly international tax accounting friend!

 

 

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I hope to be buying in the second half of this year, certainly resale and possibily in the Valencia region, maybe Oliva, Gandia or Denia. I'm guessing the vendor will almost certainly be Spanish.
After reading Gillespie's piece on "black money", I would still be very cauious of it but perhaps no longer completely rule out the very idea of it.
I know of one problem in relation to the comparsion in the UK, were the purchase may be reduced to avoid a higher stamp duty band and made up by an inflated price paid for house contents. The agreed price for the contents is not binding, so at the last minute the buyer can refuse the purchase them.


This message was last edited by smccartney on 4/26/2007.

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smccartnet, I think you should post your questions in the rentals categories to keep this thread on topic.

Thanks

Justin

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Hi Roberto,

My post re the black money calculations was intended to highlight the fact that Black Money isn´t really a con dreamed up by the vendors or lawyers but just a loophole in which to save tax.  Newbies seem to assume it was something sinister rather than the norm when it comes to resales.

True, the calculations were for my area Murcia, however, apartments with little or no land mass like your example highlights that a lawyer in order to estimate the declared value of a property needs to do a few more calculations before arriving at a safe declared value.  My lawyer uses Vc plus m2 build size calculated @ €1200 psm.  If your apartment was 75m2 X 1200 = €90,000 then add your Vc it would come to about the same as your calculation and cosequently 50-65% of the actual sales value.  There are several ways to do it, apparantly the hacienda website he uses has drop down choices etc. and even does the calculation of declared values for him.  

Incidently, as your name is Rob and I did admit I need 9 more Rob´s I will manage your property portfolio for you.  Now if you popped over to my office I have a little bargain for you

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Thanks miket for your clarification of CGT liability - now I'm totally confused

Thanks Gillespie for your post - obviously there's more than one way to skin a cat. I agree with your thoughts about the black money thing not really being some sinister con. Probably helped calm a few nerves with your explanation. Thanks also for your kind offer. You're a bit far away, but if I ever think of diversifying.....

smccartney, not sure what Justin was getting at re your post being in the wrong thread. You have a valid point about the "private" agreement. When buying, it always occurs to me that if I just denied any knowledge of a private arrangement after we've signed, there'd be very little the seller could do to get the rest of his money. Equally, when selling, I always am anxious to at least see (preferably feel!) the cash before putting pen to paper, in case the buyer suddenly has an attack of amnesia. I can understand how all this can be rather daunting to a first timer. I can only say that I've never actually heard of a case where one or the other has whelched on the (private) deal at the point of signing.

On the other hand, I've heard plenty of stories of estate agent's cars breaking down "unexpectedly" on the way to the notary, with buyers on board loaded with cash, and some good samaritan "coincidentally" turning up to assist - by relieving Johnny foreigner of his wad.

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