What is Black Money?
Many of you may have heard of the term ‘Black Money’ but may not be sure what is meant by it.
Quite simply Black Money means funds, whether it be payment for work or part payment for a property which is not declared to the tax authorities.
When buying a property it used to be common practice for a seller to ask for a percentage of the property price in ‘Black Money’ and the rest declared. However, it is far more difficult to do that now and it is not advisable to go down this route. It is illegal as it is tax fraud.
You also need to consider the future. For example if you purchased a property for 300k and paid 100k in ‘Black Money’ the deeds would show a purchase price of 200k. If you then go on to sell the property in a few years time (unless you are buying another main home in Spain), you would need to pay capital gains tax. All of a sudden if you sell for 350k your capital gain is showing as 150k, yet in real terms it is not it is just 50k. You will pay tax on the wrong amount! Yes 27,000 euros as opposed to 9,000 – that’s a big difference!
Also if the tax office consider the purchase price too different from the valuation of the property, they will tax you on the difference anyway assuming you have used ‘Black Money’ for the purchase. That means you pay not the seller.
Working for Black Money
Many employers avoid paying staff on the books as they are themselves subject to heavy Social Security payments for each member of staff they employ. Because of this many people are paid off the books using ‘Black Money’.
Again it might seem a great idea but you will not be part of the system. This means you have no rights and are not entitles to use any of the state services such as medical.