My house is due for completion soon. It is part of a new development and only a small number have been built so far. I have been told that the builder is taking advantage of the newness of the development to set the declared property value of the property at 120,000 euros less than the sale price. Apparently this issue of the "declared property value" is a Spanish tradition and it is used to avoid the seller paying capital gains tax. The buyer benefits by paying reduced VAT (7%)on the sale.
I feel uncomfortable about this because I think that this amount of under-declared value is going over the top with a local tradition. This tradition only works provided future buyers and sellers agree to maintain this differential. I could be in the position of having to declare the full price when I sell and would be liable for non-resident's capital gains tax at 35% of the supposed profit at the resale price.
I have also been told that the authorities are tightening up on this tax evasion and are levying huge fines where the value have been under-declared by 12,500 euros or 20%. Does anyone know who is fined in these cases? The tax is based on the value in the title deeds and I am not sure of the legalities of who (seller or buyer) has responsibility for drawing up the deeds.
I am going to tell the builder that I cannot agree to him undeclaring by this amount. How do I stand - I have signed a contract with the builder and paid half the price in staged payments - I presume this means that neither of us can pull out. I don't want to pull out but I want to ensure that he is not able to pull any strokes.
I also do not relish the prospect of handing over 120,000 in a brown paper bag.
Has anyone experienced an undeclared value of this extent? I must admit to feeling a little worried at the moment. Does anyone on this site have any experience of the Spanish legal system?
PaddyW
I feel uncomfortable about this because I think that this amount of under-declared value is going over the top with a local tradition. This tradition only works provided future buyers and sellers agree to maintain this differential. I could be in the position of having to declare the full price when I sell and would be liable for non-resident's capital gains tax at 35% of the supposed profit at the resale price.
I have also been told that the authorities are tightening up on this tax evasion and are levying huge fines where the value have been under-declared by 12,500 euros or 20%. Does anyone know who is fined in these cases? The tax is based on the value in the title deeds and I am not sure of the legalities of who (seller or buyer) has responsibility for drawing up the deeds.
I am going to tell the builder that I cannot agree to him undeclaring by this amount. How do I stand - I have signed a contract with the builder and paid half the price in staged payments - I presume this means that neither of us can pull out. I don't want to pull out but I want to ensure that he is not able to pull any strokes.
I also do not relish the prospect of handing over 120,000 in a brown paper bag.
Has anyone experienced an undeclared value of this extent? I must admit to feeling a little worried at the moment. Does anyone on this site have any experience of the Spanish legal system?
PaddyW
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