# buying a house - declaring a low official price



## suiko (Dec 7, 2015)

My offer for a vullage house in the Serranía de Ronda appears to have been accepted, but with the proviso that the declared purchase price should be €40,000 instead of €58,000. Obviously this is to avoid the (23%?) capital gains tax, as the owners obviously bought the place for much less. 

I was told by an agent in a nearby village that this practice was not so common anymore as there are more controls, but the owner says "maybe that's true on the coast, but not here". Basically, my question is should I go along with this, or am I risking legal issues as well as capital gains tax when I do come to sell it (I imagine by then such scams will be qwell and truly over)? I presume that if the sale is flagged as illegal, then the seller would be legally responsible, or is that not so?

It seems I would save about €1500 now in purchase taxes, but would then lose about €4000 euros on sale of the house. Is that about right moneywise?

I'm also a bit concerned because €40,000 is perhaps an unrealistically low price for a house in this village now, so may invite suspicion? 

I'm not in principle opposed to this idea, as I do want the house, though I'm not 100% happy about doing the Spanish state out of much-needed income. I thought of possibly asking them to declare it at €50,000 as a compromise ****ion, but not sure they will go along with that.

Really grateful from any advice from anyone who has some experience of all this


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## Lynn R (Feb 21, 2014)

The risk to you is two-fold.

Firstly, the Spanish Tax Office can (and does) issue a demand after completion of the sale for the amount of additional transfer tax which would have been due on the "official" value of the house. This is based on the valor catastral x the municipal multiplier. You need to find out the "valor tasación" of the property, and if it is above €40,000 I would tell the vendors you are not prepared to play ball.

Secondly, if you underdeclare you will have the same problem as the present vendors now have if and when you want to sell the house, as it will cost you more in CGT.


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## Stevesolar (Dec 21, 2012)

Hi,
Surely it leaves both of you open to potential charges of tax evasion and fraud?
If so - then not to be taken lightly.
Cheers
Steve


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## suiko (Dec 7, 2015)

Thanks. I'll ask about the valor de tasación. I imagine this is often below the market value, but maybe not by 30%?

Do prosecutions actually happen, Steve? I can deal with possibly being billed for more purchase tax, but obviously don't want any risk of that.


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## Lynn R (Feb 21, 2014)

suiko said:


> Thanks. I'll ask about the valor de tasación. I imagine this is often below the market value, but maybe not by 30%?


Depends on how recently the catastral values in that area were revised.


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## suiko (Dec 7, 2015)

Anyone have any idea how to find that out? I found this, but not sure if that means the valor catastral (same as valor de tasación?) was revised in 2015? 

Orden de 25 de mayo de 2015, por la que se aprueban los coeficientes aplicables al valor catastral para estimar el valor real de determinados bienes inmuebles urbanos a efectos de la liquidación de los hechos imponibles de los impuestos sobre Transmi

Btw, the (British) owner has sold other houses in the village in recent years, so may know about this?


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## Lynn R (Feb 21, 2014)

suiko said:


> Anyone have any idea how to find that out? I found this, but not sure if that means the valor catastral (same as valor de tasación?) was revised in 2015?
> 
> Orden de 25 de mayo de 2015, por la que se aprueban los coeficientes aplicables al valor catastral para estimar el valor real de determinados bienes inmuebles urbanos a efectos de la liquidación de los hechos imponibles de los impuestos sobre Transmi
> 
> Btw, the (British) owner has sold other houses in the village in recent years, so may know about this?


You should be able to find the date of the last revision here, click on where it says "año de revision de municipios".

Portal de la Direcci?n General del Catastro


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## suiko (Dec 7, 2015)

Yes, thanks! In the link I posted, it says the village was revised in 2007, and the "valor del coeficiente" 1.67. I tried to edit my last post, but it was after 20 mins, so it didn't allow me to.

What does this figure mean, though, in practical terms?


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## Lynn R (Feb 21, 2014)

suiko said:


> Yes, thanks! In the link I posted, it says the village was revised in 2007, and the "valor del coeficiente" 1.67. I tried to edit my last post, but it was after 20 mins, so it didn't allow me to.
> 
> What does this figure mean, though, in practical terms?


Property prices were near their peak in 2007 so that means the valor catastral is likely to be nearer the asking price than the price they want you to declare, IMO. What you need to know is the valor catastral (the estate agent should know as they should be able to see a copy of the most recent IBI bill) and that then has to be multiplied by 1.67.

We had a catastral revision here in 2007 and after the property market crashed it led to the situation where the catastral values were often higher than the prices people were (genuinely) able to sell their properties for, so the Ayuntamiento asked (and paid €1M) for another one to be done in 2014. 

A valor coeficiente of 1.67 is quite high, too. It is 1.27 here.


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## suiko (Dec 7, 2015)

Thanks! There's no estate agent, though - this is a private sale. I stayed in the house through a rental site and then spoke to the owner.


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## Lynn R (Feb 21, 2014)

suiko said:


> Thanks! There's no estate agent, though - this is a private sale. I stayed in the house through a rental site and then spoke to the owner.


Then I guess you'll have to ask the vendor if you can see a copy of the 2015 IBI bill. This year's bills won't be issued until August.


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## The Skipper (Nov 26, 2014)

suiko said:


> My offer for a vullage house in the Serranía de Ronda appears to have been accepted, but with the proviso that the declared purchase price should be €40,000 instead of €58,000. Obviously this is to avoid the (23%?) capital gains tax, as the owners obviously bought the place for much less.
> 
> I was told by an agent in a nearby village that this practice was not so common anymore as there are more controls, but the owner says "maybe that's true on the coast, but not here". Basically, my question is should I go along with this, or am I risking legal issues as well as capital gains tax when I do come to sell it (I imagine by then such scams will be qwell and truly over)? I presume that if the sale is flagged as illegal, then the seller would be legally responsible, or is that not so?
> 
> ...


It is quite true that the government has introduced tighter controls in recent years to clamp down on tax evasion but "under the table" payments are still common-place. Banks must report large cash withdrawals to the tax office and officials there check Land Registry transactions to see if they coincide with the withdrawals. But a friend who works for a large Spanish bank tells me that customers are wise to this and make regular withdrawals below the reporting threshold on the run-up to completion day. Businessmen are also keen to pay cash "under the table" when buying property to launder undeclared earnings. I was very unhappy about the arrangement when we bought our house eight years but our lawyer assured us it was normal. The Notary, who is supposed to be responsible for ensuring that all taxes are accounted for, left the room for five minutes while we counted out the cash! I love Spain!


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## suiko (Dec 7, 2015)

Thanks, useful to know! Do you happen to know what that reporting threshold is? Though it might be tricky as I won't be in Spain much.


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## Horlics (Sep 27, 2011)

Ask your gestor what the local notary thinks of such things. He's the one who will have to leave the room.

I wouldn't do it. I'd tell the owner that I want the documentation to reflect the amount I actually pay and he can take it or leave it.

If you really want the house but stand to lose 4k later when you sell, you could bung him 23% of the difference now.


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## The Skipper (Nov 26, 2014)

suiko said:


> Thanks, useful to know! Do you happen to know what that reporting threshold is? Though it might be tricky as I won't be in Spain much.


I was told but I'm afraid I can't remember! It was possibly €2,000 but I can't be sure. Perhaps somebody else knows the figure?


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## Overandout (Nov 10, 2012)

Ask yourself this:

Am I happy with wondering what each letter I get from a public administration is for the next X years? Am I happy wonering what each missed call from an unknown number is for the next X years?
Am I comfortable with having to ask myself if the statute of limitations has expired yet for the tax evasion every time I fill in my tax return? Am I happy knowing that I have defrauded my host country of its income from tax? Am I critical of immigrants into my home country who abuse the system to their financial advantage?
Search deep within yourself to find the answer. Don't ask us.


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## jp1 (Jun 11, 2011)

It is also a buyers market, so your seller is in no real position to dictate to you the terms of the sale.


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## suiko (Dec 7, 2015)

Thanks, all.

I'm not critical of immigrants doing that - Brits are much better at it! And I won't be filling in a Spanish tax return as I'm non-resident. And I don't tend to be the kind of person who worries about things too much. But yes, I am unhappy about being involved in defrauding the Spanish tax system. And yes, I would much rather it was all above board. Perhaps we could agree a higher declared price, which might be taken to include furnishings etc?

I don't have a gestor or a notario yet. Not planning to engage an abogado. Not sure about a gestor. Do I have to have my own notario or gestor?


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## gus-lopez (Jan 4, 2010)

reporting threshold is 3k. Paying in or drawing out so 2999 per day nothing happens.
& no if you are happy dealing on your own you don't have to have anyone . 2 spaniards would just deal with it themselves.


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## Horlics (Sep 27, 2011)

suiko said:


> Thanks, all.
> 
> I'm not critical of immigrants doing that - Brits are much better at it! And I won't be filling in a Spanish tax return as I'm non-resident. And I don't tend to be the kind of person who worries about things too much. But yes, I am unhappy about being involved in defrauding the Spanish tax system. And yes, I would much rather it was all above board. Perhaps we could agree a higher declared price, which might be taken to include furnishings etc?
> 
> I don't have a gestor or a notario yet. Not planning to engage an abogado. Not sure about a gestor. Do I have to have my own notario or gestor?


The notary is a local official, you can't have your own. Given that you had to ask, you need a gestor. He's going to make sure that what you buy is legal and that all the debts associated with the property are cleared before you take it on. Get one.

And I just noticed the seller is a Brit. Tell him to do it the right way.


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## suiko (Dec 7, 2015)

Thanks. So a gestor is OK? No need for an abogado? I know a gestor will be a lot cheaper - just not sure whether I need an abogado or not. Any views?

I'm going to ask the owner (her, not him  ) about the valor catastral as stated in the IBI. If, as expected, it's significantly lower I will say the declared price has to be broadly in line with the real price (I think many people declare a bit lower to cover furnishings?) I was originally thinking I would accept a declared price of 50,000, but from replies here I understand that even a smallish amount like that is not a good idea?

Esp as there is no way I can withdraw all those small sums of money, not being in Spain apart from briefly.


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## snikpoh (Nov 19, 2007)

A lot of people will tell you that you MUST use an abogado - this is simply not true. A gestor who is good at conveyancing is all you need.

You need to see the previous IBI bills/receipts - (a) to see the values and (b) to see that they've been paid. You should also ask to see any other bills.

Personally, I would agree a price for the property and then pay that price. Doing any sort of 'deal' with furnishings or black money is just downright wrong (and illegal) - so why do it.

If he won't play ball, then that's his loss!


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## Pazcat (Mar 24, 2010)

Do Gestors have indemnity insurance though?

Honest question, I know some are through law firms anyway so maybe they do or at least some do? 

Either way sounds like it will be a bit of a mess so you will need somebody and well if the guy is being shifty as it is there could be any number of other problems that need sorting first.

When we were looking for a house this type of thing came up a few times. They would accept the offer but only if you paid a certain amount in cash and undeclared which even if we wanted too we couldn't with a mortgage.

Still I take a certain amount of pleasure in knowing that 2 years later the house is still on the market.


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## suiko (Dec 7, 2015)

Will ask to see bills (as well as 2015 IBI). I guess the valor catastral is stated on the IBI bill? 

The owner had a few houses in the village and this is the last one to sell (though they apparently have their own house there). 

What reasons might there be for having an abogado rather than a gestor?


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## pnwheels (Mar 3, 2013)

suiko said:


> Thanks, all.
> 
> I'm not critical of immigrants doing that - Brits are much better at it! And I won't be filling in a Spanish tax return as I'm non-resident. And I don't tend to be the kind of person who worries about things too much. But yes, I am unhappy about being involved in defrauding the Spanish tax system. And yes, I would much rather it was all above board. Perhaps we could agree a higher declared price, which might be taken to include furnishings etc?
> 
> I don't have a gestor or a notario yet. Not planning to engage an abogado. Not sure about a gestor. Do I have to have my own notario or gestor?


Even non-residents have to file a tax return! As a home owner you must pay imputed tax every year.


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## suiko (Dec 7, 2015)

OK. From a bank receipt for an IBI bill from 2012 (more recent bills are apparently in the village at present), the valor catastral of the house is only around €16,000. This seems odd, seeing as the valores were revised in the village in 2007. Any views?


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## Pazcat (Mar 24, 2010)

Do you know if this place is on rustic land or urban land and or what the house is classified as?

If you know where the house is you can go to a website called goolzoom.es and that will bring up a page like google maps. If you zoom right in to the place and choose catastro from one of the menus on the left and an overlay of the houses will come up and you can double click on the house in question.
That should bring up a little map of the property and have details like land classification and such.

Try that and see what it says.


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## suiko (Dec 7, 2015)

I would say it's definitely urban. I can't find the exact house, but all the houses I looked at nearby are "urbano". It's in the top part of the old village - all the houses are over 50 years old, pretty much.

What all the houses in the area do say, though, is "HASTA EL 30/07/2017, EL PROCEDIMIENTO DE REGULARIZACIÓN CATASTRAL ES DE APLICACIÓN EN EL MUNICIPIO EN EL QUE SE ENCUENTRA ESTE INMUEBLE". Not sure what that means?


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## Lynn R (Feb 21, 2014)

suiko said:


> I would say it's definitely urban. I can't find the exact house, but all the houses I looked at nearby are "urbano". It's in the top part of the old village - all the houses are over 50 years old, pretty much.
> 
> What all the houses in the area do say, though, is "HASTA EL 30/07/2017, EL PROCEDIMIENTO DE REGULARIZACIÓN CATASTRAL ES DE APLICACIÓN EN EL MUNICIPIO EN EL QUE SE ENCUENTRA ESTE INMUEBLE". Not sure what that means?


It means that there is an exercise in progress this year in that municipality (as has happened in many others in recent years) to check all properties to uncover any changes, extensions etc to properties which the owners did not have permissions for and were not registered with Catastro nor the Land Registry, therefore the owners would have been paying less IBI than they should have been.

If the catastral value of the house you are interested in is so low, and extensive work has been done on it, it is possible that it could be in that situation.

Just as an example of what kind of issues can be thrown up once a lawyer gets involved, some people were buying a house near me last year. They were all set just to sign a contract with the estate agent, who had assured them that the house was completely legal and there were no debts outstanding. We persuaded them that they really should engage a lawyer. Thankfully they took the advice because within 2 days the lawyer advised them that not only was there a mortgage outstanding, but also the house was currently only registered as a single storey dwelling although it actually had 3 storeys, having been extensively reformed.


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## Pazcat (Mar 24, 2010)

If you could find the exact house all the buildings like say a shed or pool and extensions should be clearly outlined on the map.
If there is no outline for the pool or extensions then you know(not concretely however) that it stands a good chance these buildings have not been added legally.


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## suiko (Dec 7, 2015)

Thanks a lot! 

I found the address, and these are the details from goolzoom.es

Clase Urbano
Superficie (*)	46 m2
Coeficiente de participación	100,000000 %
Uso	Residencial
Año construcción local principal	1973
Datos de la Finca en la que se integra el Bien Inmueble

Superficie construida	46 m2
Superficie gráfica parcela	23 m2
Tipo Finca	Parcela construida sin división horizontal
Elementos Construidos del Bien Inmueble
Uso	Escalera	Planta	Puerta	Superficie catastral (m2)	Tipo Reforma	Fecha Reforma
VIVIENDA	1	00	01	23	I Reforma mínima	1.998
VIVIENDA	1	01	01	23 

No significant "reformas" have been done since 1998 (apart from a new kitchen and bathroom). The terrace of the house, though, is on top of the house next door rather than the house itself. Might this be a possible issue?

Any views on the valor catastyral. and how that might affect my decision? I still don't get how it is so low when apparently the village was revalued in 2007...


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## snikpoh (Nov 19, 2007)

suiko said:


> Thanks a lot!
> 
> I found the address, and these are the details from goolzoom.es
> 
> ...



That all looks fine and legal.

When you said earlier that the vendor only has the IBI bill from 2012 and that the others were 'in the village' what does this really mean. I would insist on seeing the one for 2015.

It might show an updated value and would certainly show that it's been paid.

The reason for the low value is that it must then be multiplied by the 'multiplier'. You will need to find this figure from the town hall (or whoever manages the cadastral). The figure varies depending on when the value was last calculated.

It may be that this property was NOT recalculated in 2007 for some reason so the multiplier may be larger.


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## suiko (Dec 7, 2015)

The "coeficiente de participación" is shown as 100% on the goolzoom site - is that the "multiplier"?


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## goss (May 20, 2016)

This subject interests me a lot. Through my work I heard of a case where someone put up for sale a rural building (and land). He too insisted that the official sale price must be much lower than the real asking price. In this case (incredibly) the real price was five times greater than the official price (admittedly both amounts are very low in this case). In the municipio in question, there is no capital gains tax (plusvalia), but the the profit made from his sale WOULD need to be declared in his IRPF tax return. In the end it seems to be a practice that is eternally perpetuated because he also payed more than the official price, as did the previous owner, ...

Whoever decides to fully declare the real sum is effectively paying the previous owner's taxes (correct me if I am wrong). The only way I see to break the cycle is to calculate what the seller stands to lose and offer to split the difference, adjusting the asking price in accordance. If he/she is anxious enough to sell, they should accept as this is no different to negotiating down the price a couple of thousand (or whatever the sum, as is the case).


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## snikpoh (Nov 19, 2007)

suiko said:


> The "coeficiente de participación" is shown as 100% on the goolzoom site - is that the "multiplier"?


I'm not sure but I think that means that you can live in it as a residential home 100% of the time.

I'm sure it has nothing to do with the multiplier. Like the cadastral value, the multiplier also can not be shown on any map.


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## suiko (Dec 7, 2015)

Thanks. So how might I find out what it is?


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## Lynn R (Feb 21, 2014)

suiko said:


> Thanks a lot!
> 
> I found the address, and these are the details from goolzoom.es
> 
> ...


I would be worried about the status of the terrace. You say it is on top of the house next door. However, from the details you have supplied the plot size is 23m2 and the build size of the house is 46m2, leading me to believe it is a two storey house. But the terrace is not accounted for in any way, if that's right. Is it included in the escritura for the property, and is the terrace registered with the Land Registry. If not, you could be buying a house thinking it comes with a terrace which you might not legally own. Personally I would be wary about buying a property any part of which was above someone else's, because if there is any damage (eg water leaking through your terrace into their property below) it would have to be fixed at your (or your insurer's expense).


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## suiko (Dec 7, 2015)

Thanks.

Yes, it's a two-storey house, one up one down with small kitchen and bathroom. 

I've checked about the terrace, and currently the house, the house next door and the terrace (which is actually above a store room rather than the next-door house) are all included in the same deed. This would, according to the owner, therefore be the sale of PART of the current deed. 

As regards the leakage issue, I'm aware of that and of the fact that it will need painting every year.


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## suiko (Dec 7, 2015)

OK. Spoke to the owner, and price would go up by €7000 if we don't do the lower declared price. Which is not good, as I can no longer afford it. 

I mentioned my uneasiness with the lower declared price, and she suggested agreeing a sterling price and paying from one UK account to another. Presumably this would mean that it would be much harder for Hacienda to check on the validity of the declared price?


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## snikpoh (Nov 19, 2007)

suiko said:


> OK. Spoke to the owner, and price would go up by €7000 if we don't do the lower declared price. Which is not good, as I can no longer afford it.
> 
> I mentioned my uneasiness with the lower declared price, and she suggested agreeing a sterling price and paying from one UK account to another. Presumably this would mean that it would be much harder for Hacienda to check on the validity of the declared price?


My suggestion - run away!


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## The Skipper (Nov 26, 2014)

suiko said:


> OK. Spoke to the owner, and price would go up by €7000 if we don't do the lower declared price. Which is not good, as I can no longer afford it.
> 
> I mentioned my uneasiness with the lower declared price, and she suggested agreeing a sterling price and paying from one UK account to another. Presumably this would mean that it would be much harder for Hacienda to check on the validity of the declared price?


I think this thread is heading down a dangerous road. If we're not careful we'll all end up behind bars for conspiracy to defraud the Spanish treasury!


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## Lynn R (Feb 21, 2014)

suiko said:


> OK. Spoke to the owner, and price would go up by €7000 if we don't do the lower declared price. Which is not good, as I can no longer afford it.
> 
> I mentioned my uneasiness with the lower declared price, and she suggested agreeing a sterling price and paying from one UK account to another. Presumably this would mean that it would be much harder for Hacienda to check on the validity of the declared price?


Why would it be harder? The "purchase price" would still need to be declared because the transfer tax will have to be paid in euros when the sale is completed at the notary's office (which involves a form going to Hacienda.

Personally I would be worried about doing business with a vendor as dishonest as this one appears to be. If they are williing to behave in this way, what else might they be being less than truthful about as regards the property?


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## Stevesolar (Dec 21, 2012)

Lynn R said:


> Why would it be harder? The "purchase price" would still need to be declared because the transfer tax will have to be paid in euros when the sale is completed at the notary's office (which involves a form going to Hacienda.
> 
> Personally I would be worried about doing business with a vendor as dishonest as this one appears to be. If they are williing to behave in this way, what else might they be being less than truthful about as regards the property?


Agreed - run for the hills!!


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## suiko (Dec 7, 2015)

Hmm. I really like the house, and am unlikely ever to be able to afford a house in this bit of the village again. Given the possible result of this referendum, I think I'll probably give up the search if I don't go through with this one.

Surely if the valor catastral is 16,000, even if this is multiplied by up to 130% it still comes in under 40,000. So perhaps would not invite suspicion after all?


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## xgarb (May 6, 2011)

Do you live in the village now? I would just bide my time and make it known you are looking to buy. Something will come up.

I don't see prices going up in inland Andalucia for a while.


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## suiko (Dec 7, 2015)

No, I'm in England. Have been out there four times in the last six months, and I've kind of reached the point of making a break if this doesn't work.


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## captainendeavour (Jan 14, 2016)

suiko said:


> No, I'm in England. Have been out there four times in the last six months, and I've kind of reached the point of making a break if this doesn't work.


In my experience, if some deal for something, whatever it might be, is taking so long and involves all the fiddlement (legal or otherwise) that you seem to be faced with, it isn't worth it and/or it will come back to bite you in due course. 

If it is simply a case of the other party being incompetent or tardy, it may be worth being patient and jollying them along but in your case you already know that not only is there a clear attempt to dodge taxes but there seems to be doubt about aspects of the property itself.

As for capital gains tax catching up with you come the day you sell, my understanding is that if you are 65 y.o.+ you are exempt from CGT on selling your home.


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