BLACK MONEY PROBLEMS

I assume that was a bank repo Amogles - if so thats nothing new - on repossessed stock they were permitted by the Bank of Spain to use the Catastrale value and in some cases more if the existing mortgage secured on the repo'd property was higher still - that has meant in many cases that according to open market value (i.e. what a property can physically be sold for) a new owner is immediately in negative equity SHOULD they NEED to sell for any reason ...... its a form of passing the buck I guess .... or in those cases the Euro ;-)

No, it wasn't a bank repo. My estate agent said that he believed the bank manager needed to meet some quota of selling mortgages and was getting desperate. I probably counted as a low risk customer so I guess they thought it was a no brainer to twist the figures to be able to sell to me. I guess i was just lucky.

Smiley, I was thinking about your comments earlier today.  I wonder if the fact that some of the laws in Spain seem a bit illogical is connected to the non-compliance amongst locals.

In UK we are far from perfect, but most laws make sense.  But the one you mentioned about being fined if you are 1 kph over the speed limit is an example of the poor system.  I think there is an ACPO agreement in UK that to be penalised you have to be 10% + 2 mph over the limit.  But being done for being 1 kph and fined the same amount as others doing 30 kph over the limit seems absurd.  1kph may be within the error margin of the machine.

I am told that you need to be cautious if you discuss anything with the Police in Spain.  They are very black and white in their interpretation and what they say goes, which must be frustrating.  Probably drifting off the thread a bit (!) but I'm always interested in human behaviour.

Very strange Amogles because all of the banks until the beginning of this year had all lending targets squashed - in other words if you dont lend a bean it doesnt matter - they were all making so much more than they can on mortgage from lending to the Greek Govt on bonds that personal banking branches did not have to show a return - penalties on false valuations from the Central Bank and gaol sentences on fake valuations being thrown down as well - still if you have found a situation that works your favour and he has manipulated it fair play to you, but I know of branch directors who have lost their jobs for less.

Acer I agree fully that Spain and logic should never appear in the same sentence - we actually used to have the same/similar flexibility on speed limits that applies in the UK but earlier this year (Feb I think) a new law was passed that stipulates 1km over the limit can be penalised. Personally I have yet to be done (although I passed an unmarked car yesterday going from a 70 into a 40kph downhill and passed him at about 42 so I might have one on the way. Nonetheless I have a friend who has recently been fined (100 Euros I think) recorded at 84 in an 80. Interestingly the new "traffic" laws govern pedestrians as well who can now be prosecuted for being a pedestrian with the same excess alcohol present in the body under the concept that a drunk pedestrian can cause an accident just as easy as a drunk driver. I kid you not!!! You couldnt make it up.

I don't understand how catastral values are arrived at, but since they are recorded in black and white and known to all parties, I think it would have been better all along if the transfer tax on sales was based on this figure as a percentage or whatever - as the plus valia for the seller is. That way, market values, real, perceived, made up or otherwise would become irrelevant and there would be no room for any dodgy business and manila (or even vanilla!) envelopes under the table.

If someone tried offering me double the valor catastral for my home, they'd still be only half way to what I would consider a reasonable offer and I'd probably suggest they go away and apply some more sun cream. On the other hand, I sold a trastero in the next street not so long ago for about one third the valor catastral and made a tidy profit on it too. No idea if the buyer ever got stung by hacienda for additional transfer tax, but they did question me after I declared the sale on my IRPF the following year - because they were suspsicious about me selling my principal residence so cheap. Fortunately the funcionario I saw about it quickly accepted it was their error, that the catastral reference was enough for him to check it was indeed just a shed, and that my primary residence is still the same one I've been declaring for more than a decade. I haven't heard from them since.

It's like going into a shop with Rebajas in the window, buying something at 70% off and then getting a bill of X Euro to pay the IVA at the correct price.

And I thought this claw back of tax was only happening in the Valencia Region or have other regions cottoned on to this?

One lawyer describes it as:

the tax was worked out using a formula that only officials in Valencia can understand and that at no time does a valuer visit the property.

It's exactly like the shop sale example you give. I can't for the life of me figure out how it can be even remotely legal, and am surprised the EU haven't intervened yet. One thing's for sure - it's NOT the way to bump start a stagnant property market.

As for valuers visiting the property, I'm not even sure if such a person exists in Spain, and nobody seems to have a clue about how to value a property. One estate agent visited my property, took all the details, and said they'd get back to me with a "professional" valuation of the true market price. Two weeks later they called and gave me a figure - 1.9 times the valor catastral, which is the official coeffiecient published for my municipality for the minimum acceptable amount to be declared. Like I said, anyone offering me that amount will be shown the door muy pronto! Oh, and by the way, for that "professional" valuation and supposedly advertising in all the known media on planet earth, the agent was only looking for 6% commission. Oh yes, and they also demanded exclusivity.

Must go, there's a pig flying around outside....

Yes, I know the banks have clamped down now and are not lending. But this was just before that began.

I believe the catastral value is just a simple formula. They have a formula for the theoretical value of the property based on the catastral square meters and a multiplier. This way they don't need to actually come around and inspect any properties. The multiplier varies from municipio to municipio but at least in my experience seems to be the same within a municipio or at least within the urnbanization and so doesn't take into account such things as the view or any special features. I think the multiplier is reevaluated every 10 years or so by looking at sales statistics. So the method is a bit voodoo maybe but I guess the costs and administration of looking at properties on a case by case basis wouldn't be worthwhile. In most cases the catastral value is far lower than the real valiue anyway, so hardly anybody is being seriously wronged.

In fact in this day and age they are being wronged Amogles and was the original essence of the thread about Black Money way back in 2007/8 when I first posted. The tax that is applied to a property purchaser is a Transfer Tax (i.e. Title ownership). During the hi ho silver days it was charged on the declared sale price - hence the reason for vendor and purchaser alike deriving benefit from an under declaration. Hacienda had started pursuing those people where a flagrant abuse of legislation had occurred and without proof would arbitrarily fine the new property owner PLUS charge them the level of CGT that had been evaded by the vendor PLUS charge them the transfer tax they had avoided.....ALL of this based on a perceived market value which had no bearing on the Catastral.

What is happening these days in a market where prices are much reduced is that retrospectively Hacienda are charging tax based on the Catastral rather than the genuine sale price if Hacienda think that despite the fact it can be proven without any doubt that there has been no attempt to defraud or anything else whatsoever they will lump the purchaser with an additional tax they think SHOULD be paid almost as if the market hasnt fallen. This additional tax may or may not be based on the Catastral but could be the highest possible price paid (EG a 2007 price for an equivalent property). In other words they are being inconsistent and as usual are a law unto themselves.

Logic and Spain ........ pffffffft!   

You are right Smiley.  But the Spanish, with their culture they don't take these things so seriously as we would do, hence their cliche - hecha la ley hecha la trampa - "every law has a loophole".

The 'official Spanish'  view.

I seem to remember about 15 years ago the Spanish Government issued a notice that the declared value should BE CLOSER TO THE ACTUAL VALUE.  That is, they accepted that under declaration was the norm in Spain.

As Acer said, the Spanish view on these things is not the same as say the English view.  Most English people would say that if one goes to live in UK then they should adopt the ‘English Way’.  I think it is impertinent for people coming from outside Spain to try and inflict their ways on the indigenous  Spanish or even those who have adopted Spain as their home country.  

I know this thread is mainly about property sales but black money is a problem (and to some extent a way of life) across society from the top all the way down to the bottom and we are all guilty to a point - it is not a practice limited to Spain

We have all paid for services (or goods) in cash so the supplier / provider does not have to put it throuh the books avoiding everything from VAT to corporation tax

The Spanish govt tried to put a stop to larger transactions by having a cash payment limit of 2000€ (or is it 3000€) but people still find a way around this - is it enough, has it worked?????

So we may complain about the corruption in property sales and we probably all agree it is wrong but glass houses and stones come to mind (fraud is fraud no matter how large or small) so those without sin may throw the first stone as someone once said

No income tax, no VAT, no money back, no guarantee, this is hardly an exclusively Spanish system.   

As Acer said, the Spanish view on these things is not the same as say the English view.  Most English people would say that if one goes to live in UK then they should adopt the ‘English Way’.  I think it is impertinent for people coming from outside Spain to try and inflict their ways on the indigenous  Spanish or even those who have adopted Spain as their home country.  

So, Johnzx, you think it impertinent to try and do things legally, when it is apparent some around you aren't?

I have pondered this for a long time, and conclude that given that whichever government is in power they screw the population at large, in cahoots with the likes of bankers and others, whose interests are confined to their own advantage. As a consequence, who can blame the true wealth makers of any country, that is the working classes who produce the goods, to likewise screw the government in return. Yes I know that the results are that taxation is skewed,  but by whom, in reality?

I dont  think that anyone is being impertinent JohnZX - I've lived here since 2003 and have embraced Spain with all of its quirks (some good and some not so good) and accept that I have chosen to live in another country so I choose to adapt to Spain and its laws and its customs.

The thread is merely intended to be factual and the original post that went way way back to 2007 or 2008 was issued as a warning to people that IF they chose to conclude a property purchase using black money then there was a distinct possibility (which ultimately became fact in the following years) that Hacienda would burden the new home owner with various taxes that should have been incurred by the vendor on their CGT.

Whether there was a directive issued or not fifteen years ago I have no idea and bow to your greater knowledge but as far as Hacienda and The Central Bank of Spain is concerned it is fraud - traditional or not and I know of at least one Guardia Civil Commandant (now retired) who accepted black money based on the fact of tradition and I suspect it was an accepted given at the highest levels of Govt.....but times and laws change.

Smiley, as a relative newcomer I can appreciate you would not be aware of the notice / directive which I mentioned, and that it will take time for you to understand the Spanish culture.

The thread is merely intended to be factual and the original post that went way back to 2007 or 2008

Way back ?  Well that might seem way back for some.  I am also a newcomer, having only been ‘in Spain’ since 1983,  and lived here permanently since 1987, but 2007 seems pretty recent even to me.

Whether there was a directive issued or not fifteen years ago I have no idea and bow to your greater knowledge but as far as Hacienda and The Central Bank of Spain is concerned it is fraud - traditional or not and I know of at least one Guardia Civil Commandant (now retired) who accepted black money based on the fact of tradition and I suspect it was an accepted given at the highest levels of Govt.....but times and laws change.

I don't know anybody in the Guardia Civil personally, but many of the Spaniards I deal with on a regular basis, from the guys in the bar to the builders who fix things in my house, I hear the same message. They more or less all say "There is no shame in stealing from theives and criminals, and the government is a criminal organizaition, so there is nothing unethical about fiddling your taxes".

The only way to put an end to this is for the government to start rebuilding trust, transparency and accountability. From my own dealings with the police and ajuntamiento (I never dealt with higher government so can't say) that accountability and trust exist only on paper and rules appeat to be being made up or ignored as you go along.

Johnzx, your logic seems curious.  You say..."I think it is impertinent for people coming from outside Spain to try and inflict their ways on the indigenous Spanish or even those who have adopted Spain as their home country"...

You've previously stated you were a police officer and now do volunteer work with the Spanish police.  Do you really advocate following the "adopted ways of Spain" and thus breaking the law?

Just because you live in a country does not mean you have to mimic the locals.  I like the Spanish in most ways but their general attitude on some aspects, eg their treatment of animals is archaic.  Are you saying that it's necessary to become brainwashed and ignore all these things, as part of taking up residency in Spain? 

I don't recall that requirement being part of EU law.

John ZX as is patently clear I am a newcomer having arrived in 2003 (but as we seem to be playing tit for tat, I might add that my grandparents bought their first house in Torremolinos in 1957 and I had been a regular long term visitor from 1961 when Malaga was still just a military airfield and had to fly into Gibraltar until about 1980 when they sold the house and moved back to the UK to live out their days). I continued to visit friends made since childhood regularly, so I am well aware of the cultural differences and the concept of right way, wrong way and Spanish way.

Clearly while you have much more expertise on living in Spain and its cultural differences, "way back in 2007" in my humble opinion is a long time in relation to both the law and the real estate market - which is what this thread is about and its original intention "way back" in 2007. A great deal has happened in the 8 years since then - the country has gone "bankrupt", the banks have stopped lending, started again, stopped again and started again. Hacienda has amended multiple tax laws and changed tax levies and the list goes on and on. While 8 years may indeed be a brief interlude in the window of time, in terms of events quite a lot has happened.

I certainly didnt intend impertinence or disrespect to the Spanish or their culture (I choose to live here and I dont wish this to be England in the sun). At risk of repetition, the original purpose of the thread was to warn people that despite the historically accepted norms over B, there could be an ongoing price to pay long past the purchase transaction. At that I will leave it as it seems as if this thread is going completely off topic.