16/09/2021

Buying in Spain

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House purchase in Spain was a lot like the Wild West back then. There was the price the owner wanted to achieve and the price he/she was prepared to declare to the authorities. The advice back then was not to agree to declare less than 70% of the real sum because this would probably create a tax problem for you in the future. We saw one property that the guy wanted the declared value to be just 40% of the actual purchase sum. Wealth tax and your catastral (rateable value) were all triggered from this declared value so there was some benefit in agreeing to the scheme – or is that scam?

The differential sum had to be paid over in cash at the office of the notario. This professional is confusing to a Brit, he is not a solicitor looking after your interests, his task is focused entirely on working for the authorities, he records the transfer of the land from the seller to the buyer and makes sure that all prior debts on the property have been remitted.

Montgo

I recall reading up the various regulations and at this time you were supposedly not allowed to take more than £4,000 in cash from the UK out to Spain. I wondered how I was going to get the necessary readies down to Javea, I need not have worried. We had opened a local bank account with Barclays Spain, and their regional manager phoned me, she said that I presumably had some items of furniture for which I had agreed to pay in cash, so how much cash did I need for the completion meeting? The ‘scheme’ was deep-rooted!

As the purchase was in the year 2000, Spain was still using the peseta, which had no large denomination note, so when I turned up at the bank they gave me two large plastic bags of readies to take to the notario. I felt like there was a large target on my back for that journey of several miles.

The scheme proceeded. We gathered around a board table with the notario who read out the translation of the proposed agreement, take any amendments, then excused himself to go and engross the finally agreed text. This was my cue to invert the two large bags of cash onto the table. The estate agent did the honours of counting it, then divided it into two piles – one pile was the agent’s 10% fee (yes 10% back then, it dropped to 3% soon after), the rest was for the seller – just as well there were two bags!

The notario arrived back while the counting and divvying-up was in process, apologised and suggested he had more to do. He returned later to see we had finished and then completed his role. The vital player in all of this was my fiscal advisor who was a local, recommended to me by friends, she walked me through each process and reassured me that this was normal.

ASIDE: Spain’s grey economy was challenged in 2002 when the country switched to the Euro. Many Spaniards appeared to have hoarded pesetas under mattresses and elsewhere. Now, somehow, they had to launder these back into the system. There was a six-month period when land, property, car and boat sales sky-rocketed providing new bolt holes for this grey cash.

Of course, the 500-euro note would have made my property transaction much less conspicuous. The note gained the nickname ‘Jesus’ in Spain, because everyone believed in it, but few claimed to have seen one (a sense of déjà-vu for me from the Hugin 100). As one of the world’s highest-value circulating banknotes it soon became the go-to note for international criminals, particularly drug dealers, but in 2016 the EU announced it would be phased out by 2018, because of its illicit popularity.
In other news – by 2010 the UK police Forensic Science Service announced that every UK banknote tested positive for cocaine! This has a scientific basis unlike the urban myth that some official study proved that peanuts (peenuts?) set on bars usually contain multiple traces or urine from patrons not washing their hands.

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