Law to make black money deals thing of the past

9th January 2006, Comments 0 comments

9 January 2006, MADRID — A new law to be passed this year is to crack down on the common practice of paying part of the price of a new home or rent 'in black'.

9 January 2006

MADRID — A new law to be passed this year is to crack down on the common practice of  paying part of the price of a new home or rent 'in black'.

At present those selling or renting property do not fully declare the value and pay all or the difference in cash, called "dinero negro" or black money.

But the new law will require all parties in a property transaction include the method of payment – cheque, mortgage, cash or other property – in the deeds of the property.

All the parties must include their tax identification number or NIF in the documentation for inclusion in the property registry.

These measures will allow the authorities to keep track of homeowners that do not register their properties and do not pay tax on income from renting or selling.

To ensure landlords abide by the law, the new law will have tenants include the property registry number on electricity bills and contracts.

This way officials will know which properties are being lived in.

A common trick for landlords to avoid taxes is to say an apartment is empty when it is not.

All contracts agreed upon before the new law takes effect will have to adapt to the new legislation.

Power companies will have six months after the law comes in to include the registry numbers on the bills.

Last year, the government passed a measure making it mandatory to include the property registry number on income tax forms – and 101,600 new landlords suddenly appeared, 8.6 percent than the year before.

Taxes from rental income rose last year from EUR 862 million to EUR 10.2 billion.

Guillermo Chicote, president of the Spanish Association of Developers and Builders, said: "In the market for new apartments there are more controls. But in the existing home sales market, two individuals can do whatever they like."

But tax inspectors believe the new law does not go far enough and will still allow a landlord and tenant to ignore the legislation, if they agree to do nothing.

Others say it does not stop land speculation, which some experts say is the real fraud issue.

[Copyright EFE with Expatica]

Subject: Spanish news
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