# Perils of declared lower purchase price



## Rabbitcat (Aug 31, 2014)

Hi folks

I think I know the answer on this but have been wrong so many times re issues in Spain and very grateful to more knowledgeable members keeping me right so thought I would run this past you all

On a couple of occasions during our house search the idea has been mooted that a lower selling price is declared between us and the vendor hence keeping the amount due in purchase tax lower.

I suspect the peril of such an arrangement arrives if one went to sell as an inflated CGT. would probably be levied due to the difference in actual and declared purchase cost. 

Have I got this right ?

Cheers


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## Lynn R (Feb 21, 2014)

Rabbitcat said:


> Hi folks
> 
> I think I know the answer on this but have been wrong so many times re issues in Spain and very grateful to more knowledgeable members keeping me right so thought I would run this past you all
> 
> ...


Yes you have. But there is another peril as well. Whatever price the house is actually sold for, if Hacienda consider that it has been sold for less than it's "official" value (known as the valor tasación), they will simply send the buyer a bill for the additional purchase tax due on the difference between the actual sale price and the valor tasación. If anybody suggests such an arrangement to you you should always demand that the agent tells you what the valor tasación is to guard against this possibility. If they tell you that the extra tax demands never happen, they are lying to you.

The valor tasación is based on the catastral value of the house x the municipal co-efficient.

The 7% figure for purchase tax in this link is out of date as the tax has been increased since it was written, but it explains the issue:-

http://www.abacotaxes.com/complementary-tax


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## snikpoh (Nov 19, 2007)

Don't do it. This is illegal although quite prevalent!

STAY LEGAL - DO NOT PAY IN BLACK!


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## Rabbitcat (Aug 31, 2014)

I agree entirely indeed our view is not to do business at all with any agent / seller who suggests such fraud


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## The Skipper (Nov 26, 2014)

The other problem might be laying your hands on a suitcase full of cash. Banks now have to report all large withdrawals to the Tax Office (I think anything above €2,000) and the taxman cross-checks large withdrawals with house purchases recorded at the Land Registry. However, a friend who works in a senior role in a large Spanish bank tells me that customers get around this by withdrawing small quantities of cash over a long period in the run-up to completion. I must be honest, we paid a large cash sum "under the table" but we had a nervous few hours travelling from the bank to the Notary's office. It was strange that the Notary, who is responsible for ensuring that everything is done above board and that all taxes are accounted for, left us alone in his office for 15 minutes while we handed over the cash and the vendor counted it! Now that I am older and wiser I would not do it again!


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## Lynn R (Feb 21, 2014)

The Skipper said:


> The other problem might be laying your hands on a suitcase full of cash. Banks now have to report all large withdrawals to the Tax Office (I think anything above €2,000) and the taxman cross-checks large withdrawals with house purchases recorded at the Land Registry. However, a friend who works in a senior role in a large Spanish bank tells me that customers get around this by withdrawing small quantities of cash over a long period in the run-up to completion. I must be honest, we paid a large cash sum "under the table" but we had a nervous few hours travelling from the bank to the Notary's office. It was strange that the Notary, who is responsible for ensuring that everything is done above board and that all taxes are accounted for, left us alone in his office for 15 minutes while we handed over the cash and the vendor counted it! Now that I am older and wiser I would not do it again!


We were talked into under-declaring too, otherwise the vendors said they wouldn't go ahead with the sale, but our solicitor insisted that we limit it to a certain amount which was much less than they were asking us to under declare by (they only wanted to declare about two thirds of the sale price). I gave POA to our solicitor to complete the sale so it was she who withdrew the money and went through the charade at the notary's office and I wasn't there, thank goodness. 

I wouldn't do it again either, and if I sell my house I won't be asking the buyers to do it. If I ever do sell it will only be to buy another property here anyway, so CGT won't be an issue.


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## snikpoh (Nov 19, 2007)

The Skipper said:


> The other problem might be laying your hands on a suitcase full of cash. Banks now have to report all large withdrawals to the Tax Office (I think anything above €2,000) and ...


I thought it was 2k as well but was recently 'corrected'. 

I was told it's 2500€ for residents and 15000€ for non-residents.


Any one know if these figures are correct?


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## Rabbitcat (Aug 31, 2014)

15000 seems a lot


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## davexf (Jan 26, 2009)

Hola
One other problem of under-declaring is that if your house is compusory purchased, or pulled down, then the money you get will be less than if you declared the full price. 

Davexf


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## Overandout (Nov 10, 2012)

Although I would never advocate under-declaring it is worth taking into account that our British attitude to "doing things correctly" can upset the locals!

We have just bought a flat in Madrid, and the seller wanted us to under-declare. We refused.

After signing the escrituras and receiving the keys we went to the property to find that the sellers had not left the property as they should have... (I will not go into details as this is a public site and we are currently in the process of suing for damages).

Anyway, just be extra careful if you refuse to under-value as it could cause the vendor to "save money" in other ways to your detriment!


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## snikpoh (Nov 19, 2007)

Whilst we're on the topic of buying property, is it common practice, in Spain, to pay a percentage to the estate agent?

One has just quoted a 'fee' of 3% + IVA - and that's for the buyer to pay as well as the exorbitant fees they charge the seller .


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## Pazcat (Mar 24, 2010)

It never came up when we were buying and if it did we wouldn't of paid it anyway.


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## Lynn R (Feb 21, 2014)

snikpoh said:


> Whilst we're on the topic of buying property, is it common practice, in Spain, to pay a percentage to the estate agent?
> 
> One has just quoted a 'fee' of 3% + IVA - and that's for the buyer to pay as well as the exorbitant fees they charge the seller .


I have heard that Tecnocasa do that, but we certainly didn't pay anything to the estate agent when we bought (we didn't buy through them).

https://www.idealista.com/news/foro...de-tecnocasa-que-opinion-tienescomo-te-ha-ido

http://www.burbuja.info/inmobiliaria/consumo-responsable/635287-tecnocasa-comision-al-comprador.html


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## snikpoh (Nov 19, 2007)

The agent is insisting on a signed contract stating 3%+IVA with a minimum of 1000 before they will show the buyer any properties.


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## Overandout (Nov 10, 2012)

snikpoh said:


> The agent is insisting on a signed contract stating 3%+IVA with a minimum of 1000 before they will show the buyer any properties.


We bought through an agent, and we paid a fee as purchasers. It does indeed hurt a bit as it adds to the purchase costs and I can see why people don't want to pay.

But in our case, the fact that we have an agent as an intermediary is helping us a lot with the claims we are making against the seller, so in the end I see it as money well spent.

If you buy privately, you are on your own if things go wrong.

Also, by going with the agency, once you make an offer on the property, that cannot show the property to any other potential buyers. So, if the agent is a sole agent, it is much less likely that you lose money due to the sellers finding other buyers.


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## Rabbitcat (Aug 31, 2014)

4 agents I have used all stated there's no fee for buyer only seller


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## The Skipper (Nov 26, 2014)

snikpoh said:


> Whilst we're on the topic of buying property, is it common practice, in Spain, to pay a percentage to the estate agent?
> 
> One has just quoted a 'fee' of 3% + IVA - and that's for the buyer to pay as well as the exorbitant fees they charge the seller .


When we were viewing nine years ago one agent told us that we would have to pay them 3% if we wanted to buy any of the properties they showed us. As the properties we were interested in viewing were also with rival agents who didn't charge commission, you can guess what we did!


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## Madliz (Feb 4, 2011)

I am currently a seller. I hope to soon become a buyer (in fact this month has been the busiest yet). :fingerscrossed:

I am frequently contacted by estate agents (all Spanish) wanting to sell my property. They ask between 3-5% commission, which then has IVA on top. 

Well, they can ask. I tell them that I'm prepared to pay 2% and no more, take it or leave it. They all look stunned, but they invariably agree. If they're so confident they can sell it, that's a large amount of money for not a lot of legwork. 'Don't ask, don't get' is how I was raised. 

As for expecting a buyer to pay commission, my attitude would be the same. They can ask, but there are plenty of agents and plenty of properties around. Most serious vendors will have their property visible to those who are searching.


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## Rabbitcat (Aug 31, 2014)

The Skipper said:


> When we were viewing nine years ago one agent told us that we would have to pay them 3% if we wanted to buy any of the properties they showed us. As the properties we were interested in viewing were also with rival agents who didn't charge commission, you can guess what we did!



I can and I think you were mad paying that 3%


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## The Skipper (Nov 26, 2014)

Rabbitcat said:


> I can and I think you were mad paying that 3%


Now don't be silly ... I'm only half Irish!


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## SandraP (Apr 23, 2014)

It was my husband and I who were asked to sign the contract, we said no and said we would show it to our legal representative (snikpoh & mrs snikpoh). We have been to see houses with another agent who has asked for nothing, we are viewing some tomorrow & on Tuesday also with no contract. I have just ripped the contract up, but may locate it and upload to the site (obscuring names and addresses) when we get home in October.


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