Black Money on Spanish Properties

What is black money and under declaring the selling price of property in Spain?

Avoid Black Money - you have been warned
To be frank and totally honest avoiding tax is not easy unless you blatantly break the law and do not declare everything you should, something we do not recommend you do no matter what country you are in. Black money on property is a tax avoidence "scheme" and is illegal as you are defrauding the tax office.

It is strange but buying and selling property in Spain and black money used to be said in the same breath. It is true to say that for many years, under declaring the full selling price of a property was common practise. However, all this created was a large vicious circle of tax evasion. The first buyer who allowed the selling price to be under declared helped save the seller a tidy sum on capital gains tax. But when it came to that buyer becoming a seller, the gap between the original declared selling price and the new selling price was much bigger than it should have been. This meant that the current seller, if they declared the total price would be paying capital gains tax on a higher profit, even though in reality they paid more for the property than the tax man is seeing. So the only person the current seller has helped is the original seller. OK the current seller probably got away with paying IVA on a lower amount, but with property IVA at around 7% and capital gains tax at 35%, who had the better deal?

So now the current seller under declares the current selling price so as not to get stuck with a higher capital gains tax bill than they should have, and so continues the illegal vicious circle.

The simple answer to all of this is DO NOT ACCEPT AN UNDER DECLARED PRICE FROM THE SELLER. If they will not sell to you unless you do our advice is to walk away. If you knowingly participate in such activities, you are still liable to prosecution.

New laws regarding Black Money in Spain
In addition to the above, the actual Spanish system has been changing over the last few years. There are new additions to the law and restrictions have been imposed to counter act money laundering. Quite simply a law has been applied directly to Spanish Notaries, tax advisors, financial advisors, bankers and lawyers in relation to them advising their clients on transactions related to real estate and / or setting up companies. The above professionals are now required to report any suspicious activities or sums of money to SEPBLAC (Servicio Ejecutivo para la prevencion del Blanqueo de capitales - Bank of Spain) which has been tasked as being the executive service to prevent money laundering and supsicious transactions. Failure by these professionals to do so can result in prosecution and even jail