Noinvite the Sofia News Agency reported yesterday on the common practice sweeping Bulgaria, of submitting false prices on property deeds to save tax.

In Bulgaria if the client is found guilty of having been party to such a deal he could be charged with a fine of up to 1,000 pounds and even imprisonment of up to three years.

The article states that “the practice proves to be common with Bulgarian constructors as well who are trying to avoid VAT, which has to be paid on new build or off plan sales. They offer the potential of putting in a low and false price in order that they do not pay all or any of the VAT due.”

This has been a long-standing issue in countries like Spain, whose second hand property market has been damaged because of this same practice. Many naïve or unsuspecting foreign buyers just seem to accept that this is common practice.

Why is it an issue?

This activity is illegal (tax evasion) and it means that when the buyer comes to sell the property on again, they need to find buyers that are willing to do the same again. If the sellers sell at the market rate and place this on their deeds, they will then be due for a huge capital gains tax bill.

Let me give you an example:

Mr A buys a property from Mr X

The property is bought for €200,000
The price declared on the deeds is €170,000

Mr X receives €30,000 in black money (undeclared to the taxman), which goes towards a new Mercedes SLK
Mr A only has to pay 7% IVA on €170,000 rather than €200,000, which is a saving of €2,100

2 years later:

Mr A wants to sell his property to Mr B

Mr B is not interested in under declaring and Mr A is desperate to sell, so:

As we know property was bought for €170,000 on the deeds

Property is to be sold at €220,000

So Mr A must pay capital gains tax on the following:

$220,000 - €170,000 = €50,000

As a non-resident capital gains tax is charged at 35%

So the amount due to the tax office is: €17,500, which in the scheme of things is more than 10% of the original property price on deed!!

I also haven’t included all the other costs to buying and selling in this example. Mr X is the only party to really benefit from this scenario.

(This is an example and there are many other factors to consider)

I must point out that the Spanish Government is trying to clean up this practice and many lawyers will now advise you that it is unwise to go down this route. However there are still a few bad seeds in the system!

My advice is seek advice from an independent lawyer, try not to use the lawyer that the estate agent or developer recommends.

Have you experienced this first hand? I am aware that property tax evasion is rife in many other countries; please comment if you can add value to this post.

Luxury lifestyle provider, DAMAC Properties, announced a spectacular “Double Debut� in Abu Dhabi earlier this week with the launch of two prominent real estate projects. Dolphin Towers, a three-tower development, which includes the following, 400 one, two, and three bedroom luxury condominiums and 10 exclusive sea facing townhouses, which will be located within the stunning Al Raha beach development. Oceanscape, an iconic mixed-use development, which includes 184 one, two, and three bedroom apartments with state of the art finishing and 8 townhouses, is due to be positioned on the renowned Al Reem Island.

The prices at Dolphin Towers start at:

1bed 1,123,000 AED
2bed 2,031,000 AED
3bed 2,146,000 AED
For currency conversion click here

 

 

 

The prices at Oceanscape start at:

1bed 1,249,000 AED
2bed 1,896,000 AED
3bed 2,789,000 AED
For currency conversion click here

 

 

 

 

 

 

The two developments have many luxury qualities and are close to amenities. The townhouse properties have their own private swimming pools and are designed with the latest design trends in mind.

Marina Heights has also been launched for the multiple unit investor.

The figures below are launch prices:

1bed 1,206,000 AED
2bed 1,829,000 AED
3bed 2,689,000 AED
For currency conversion click here

 

 

Literally known as Bird Island, Kusadasi is the setting for a series of quality property by Irish development company Capital Developments. Selecting Kusdasi’s most famous location as the setting for their real estate project, Ladies Beach lies just south of the town centre. The main promenade offers plenty of eating and drinking establishments.

With offices in both Ireland and Turkey, customer service is their forte with the focus on new development property which appeals to the second home buyer that offers strong rental potential supported by a prime location at just 1hr 15 mins from Adnan Menderes Airport (Fly Thomas Cook and British Airways).

Eliminating the ‘middle man’ means off-plan apartments in their Lemon Grove development start at 111,000€ whilst the semi-detached villas in Walnut Grove are being marketed at 128,000€. Both developments are completed to an extremely high standard and the developer continues the service by offering a well thought out furnishing package tailored to the overseas property buyer.

As to be expected when investors find a good project, sales are strong. Their first project Olive Grove comprising apartments, townhouses and semi-detached villas which sold off-plan for 96,500€ and completed in August 2005. Continue reading ‘Turkish Property off plan and direct from the developer’