The thorny issue of black money in Spain is one you should be aware of when buying Spanish property. Black money is when you buy a house for one price, let’s say 200,000 Euros for argument’s sake, and you declare less on the deeds, for example 180,000 Euros. The reason people do this is very simple, tax avoidance. The buyer would save themselves around 1400 Euros in tax in the above example, 7% of 20000 saved, and the seller might well save a lot on capital gains, eg 18% of any capital gain, let’s say the original purchase was made at 150,000 Euros and then the sale was declared at 200,000 in theory there would be a capital gain of 50,000 Euros minus costs on purchase and sale, round about 15,000 Euros. The saving therefore would be around 3600 Euros.
So after that long introduction as to what black money is when you are buying your property you must also realise that the “Black Economy” in Spain is huge. When the plumber turns up to do a job on your house he will always almost without exception ask you if you want a receipt, what he is really asking is do you want to pay VAT. It is conservatively estimated that the Spanish black economy at the height of the boom was around 12% of the whole economy. The real amount now may well be around 15-20%.
Back to our case and the black money when you buy a house. We always say don’t do it but you must realise that sometimes a seller will not sell if they do not receive money in B. You can easily justify a small amount as being for furniture or even a car that is left with the house. However you must declare this at your bank when taking out more than 6000 Euros in cash.
Why shouldn’t you do it, apart from the fact that it is illegal? Well if you underdeclare on purchase when you are going to pay 7% tax then you will pay for it further down the line when you sell at 18%. Do the maths!
As this is a public blog the best advice to give you is don’t even do that. If you want more advice about “Black Money in Spain” then don’t hesitate to get in touch.
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