25 April, 2017
Black Money in Spain
Black Money in Spain – a ‘win-win’ for both buyer and seller
Black money, or ‘money under the table’, is a very common thing in Spain in the Real Estate sector.
50, 000-200,000€ in Black Money:
The first time I arrived at an Escritura closing in Spain 12 years ago, the Notaries office was full: buyers lawyer, sellers lawyer, sellers bank, buyers bank , me the real estate agent and the notary. Suddenly the buyer took out 50.000€ from his bag. I was shocked! At this time I had no idea what was going on. I didn’t realize how normal this practice was in Spain. It was hard to understand how all these ”professionals” could just sit there and say nothing. I came from a Real Estate job in the USA and there it is not normal to be involved in black money for any sale.
One time I even saw a seller give 200.000€ in black money to the buyer. I could not believe what I had seen and I should mention that Casamona has never had anything to do with any of these transactions.
My bank contact took out black money from my account without my knowledge!
In 2007 I was buying an apartment and I told everybody – the seller, the banks etc – that I did not want to be involved in black money. It was a Catalan agency that I bought the apartment from. When I was sitting at the Notary suddenly my own bank contact took out 20.000€ from her bag. I asked her where it had come from and I discovered that it was my own money? She had taken out 20.000€ from my account to give to the seller. The dumb Danish girl who did not know the “culture” here in Spain! So, of course, I refused, and they were all mad at me!
And I learned that many Catalan sellers did not want to sell unless they got black money and also that Catalan buyers were 100% confident with this. I also learned there was something wrong with the way the bank contact would accept a loan. I never understood it 100% but somehow they made the loan higher and got 5000 euros from seller in black money too. A guy from TechnoCasa tried to teach me, but I never worked it out and I wanted to make an agency which was more Scandinavian and used normal bank loans!
The problem in Spain is that they are used to cheating the system. For real estate transactions it is a WIN- WIN for everybody. The seller is winning because they can pay less in tax; the buyer is winning as they also pay less tax. I wonder why they have a system based on cheating just to benefit themselves. It makes no sense!
Change on the way
The market has changed a lot since 2004 and I see less and less black money involved in sales. Maybe it is because people do it less, or it could be because we are focusing on selling to foreigners. Foreign buyers do not want to pay in black money as for them it is risky – if they want to sell again they will have to pay more tax unless they go through black money once again.
I have sellers who are setting a price for their apartment and they want 100.000 of the price in black money. I just can’t believe how open they are about it; it is like they have nothing to lose. If I tell my lawyers they will just tell me it is normal here. The attitude is that all people in Spain are corrupt – even the king… So why can’t they be too?!
Divorced men are cheating their ex-wives
As well as this, the big trick many divorced Catalan men seem to try out is to say they sold the flat for less, “forget” to tell their ex-wife about the black money, and then this way they get more than the wife. Foreign men have also learnt this trick. So now I have lawyers from all over the world calling me to ask what the correct price should be for a property. As we do not involve Casamona I can only tell them what our agency would have sold it for.
Casamona never recommends our buyers to be a part of this. Many of our owners need to sell fast however at Casamona we only take in apartments where the owner does not insist on black money. We have lost many flat finds because of this and I still have sellers who do not want to list with us because we don’t want to ask our buyers to do something illegal.
I would recommend the Spanish government to make it less attractive for one of the parties to pay with black money. For example, if there were no tax on selling I am sure they would get the money in from a much higher transfer tax. In many other countries the transfer tax is a lot lower and in Denmark we have no tax on capital gain for an apartment. This is the way to avoid black money with sales! You need to make a WIN- LOOSE! Somehow!