I know this subject has been raised before. Can anybody tell me once and for all what is the way the new law is being applied with regards to the declared value when purchasing property in Spain? My understanding is that since the new law was passed in January it is now illegal to underdeclare and you will be fined heavily if you do this . My question is this does this apply to the whole of Spain or just parts. This may seem a stupid question to ask but I am trying to purchase a house and I have seen many I like but when I ask the question what are you declaring at - the answer is almost always 40%-60% of the purchase price. When I say how can you this is illegal now, the stock answer is "this is Chiclana and everybody does it its not like the rest Of Spain". Is this correct? My understanding of the new law is that you have to supply a copy of the private contract which has the real price of the property stated to the Notary who in turn then passes this onto Hacienda. Is this correct? If so how can these people get away with this?

Please has anybody completed in Chiclana since January and did they have to supply a copy of the private contract in front of the Notary.

Would be grateful to hear from anyone who has recently completed a sale in Chiclana since the new Law was applied or who has any advice whatever on this subject.

You can always PM if you prefer.

Thanks

I am not being facetious but why don't you go and ask a local Notary. They are very helpful and will give you the facts. (It may be safer to ask at least 2 or 3 notaries in case the answers are different though.)

Thanks Nige that is a good idea. However knowing the way the Spanish legal system operates I will probably get a different answer from each one!!

Many a true word....... But at least if you do get different answers you know which Notary to use.

Do you know which law this is (any references)?

I'm not sure I'd ask a notary. My experience of notaries is that they are very unreliable as a source of knowledge for changing practices, unless you know, or have strong recommendations for a good one.

It would be better to consult a good Spanish solicitor who would probably better advise you about your specific position and assess how your interests best fit in with the law. Of course, there would be a cost to such a consultation. A notary will view it from their own perspective, hence the advice may not be in your best interests, one way or the other.

:scared:

Been looking around to see if I can find any such law, but nothing so far. I've come across new legislation issued by the aynutamiento de Pamplona, that seeks to simplify the payment of plusvalÃ*a (capital gains prepayment on property normally paid by the purchaser) from Jan, 2006.

In the above, they explicitly state that the payment of plusvalÃ*a will be based on the valor catastral and not on the purchase/sale price:

Clearly, the legislation you refer to could be local (municipal), regional (autonomous community), or national, so your question is indeed not stupid. However, it makes it hard to find any information on it to assess it's impact.

I was speaking to my Spanish solicitor about this last week, and she said 80/20 is the best option.

If it's the one I've just been reading about (and it most likely is), then note that it is a *proposed* new law, currently in the government discussion/proposal stage.

La Ley de Prevención del Fraude Fiscal is intended to reduce the practices of non-declaration of rental and other property income and the under-declaration of real estate assets in a sale/purchase transaction.

However, it's meeting strong opposition, with many favouring a gradual introduction of measures and fiercely resisting a sudden cut-off point where everything must suddenly be declared outright and other (taxation) laws don't keep pace with the changes.

The proposals have been aplauded for the measures against non-declaration of income from rental and property, but criticised for also not being water-tight in eliminating the practice of under-declaration between two like-minded private individuals engaged in a sale/purchase transaction, in that there are still relatively straightforward ways around the proposals.

My guess would be that this law is still going to undergo changes and won't be introduced for quite some time yet - although I will try and read-up some more.

In the meantime, anyone buying on the 80/20 general rule would not be going too far out on a limb, in my opinion. There will be many in a similar situation and any new law is not going to line up millions against a wall to face a fiscal firing squad, in this day and age. It's a far cry from the 40/60 of many years ago.

Reading this passage in the above "News Item" from some Internet publication made me think. Could the Taxes from rental income increase in one year by nearly 12 times :scared: An extra 9 BILLION tax in one year ! That's a lot of money. I wonder whether anybody has seen the official report. Would make interesting reading.

The government is not blind to the problem, it merely needs to find methods by which the general population can "come clean" without undue sanctions, or penalties.

The only sensible approach is to take the long-term view and ignore, to an extent, what has occurred in the past if they want to set things straight and align with the EEA. In the above case, clearly the incentives to declare were better than the alternatives and the legislative measure "hit the spot".

General observation on the plus valia situation, at the end of the day, you have to be prepared to walk away from a purchase if the vendor doesn't agree to a reasonable division. Our experience is that solicitors reckon 60/40 is reasonable. This form of tax evasion has been an accepted custom for so long Spanish people are not prepared to give up the practice and simply won't sell the house if you don't agree. They know there will eventually be somebody else who will buy, often at a higher price. Has anyone else noticed that if properties don't sell, they increase the price and wait for the market to catch up? This has definitely been happening over the last 2 years. So you run the risk of being priced out of the market unless you have an unlimited budget to play with. I have seen only a couple of properties reduce in price and they remain unsold, probably because there is something seriously wrong with them.

Thanks everbody for all your input. I think I can establish now that a ratio of 80% white and 20% black is still acceptable. However to add further fuel to the fire a lawyer on another respected forum posted this response to my original question which I have quoted below for anybody interested.


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"Bearing in mind it's ilegal, no matter how widespread it might be, no more than 15%, tops. Besides, Hacienda will implement new wys tomake sure the figure of the private contract matches that of the title deed, so you might get your fingers burnt.

It is too risky at present. I would avoid it all together, that's my professional advice. Do not underdeclare. Only you will be fined when caught."


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Comments please!

Of course the system will change, but it's going to have to change to ensure that there isn't another civil war along the way - unless each political party has a suicidal wish to only remain in power for a single term. 80/20 is more than reasonable. 85/15 is erring on caution IMO.

It's what I've been saying above, it won't happen overnight. Ultimately we do what we believe is in our best interests and acceptable within the current scope of the interpretation of the law, not necessarily the letter, even though one day the letter may be applied against the practices of such.

Finally, I still stand by the differences in the value of a property and the price that is paid for it, which is where the latitude arise from - again, in my opinion. If I were to pay a premium for a property for personal reasons (I like it, see potential, etc., but don't want to lose it) and over the next 12 months 3 similar properties sell for €10K less ... should I be paying a tax on my premium as well?