Dinero Negro (black money) is a common practice used in Spain whereby you have two prices for a property. One price is the actual price declared on the deed (escritura), the other price higher is the price that you will pay to the seller, the price on the private contract. The difference between the two prices will be in cash to the seller thus the name black money. By doing this, the seller will pay less plusvalía (capital gains tax), and the buyer have to pay less VAT (6% of the second-hand property price), its also reduce the notary fee and legal stamps. Usually, an estate agent calculate his commission on the higher price not the one declared on the deed.

A recent report estimate the price which figures on the deeds of second-hand house sales is actually 30% - 40% lower than the real price, this is a huge hole. The practice is common that in many case if you refuse do it the seller will look for another buyer. Fortunetely, they are more sellers prepared to declare the real price, recently, the socialist government of Jose Luis Zapatero started some reforms to reduced tax frauds , below is a few of the

• The means of payment (cheque, cash….) must be included in the property deeds at the time of the sale
• It will become mandatory to take the private contract (with the real price) to the property register.
• The catastral number must be included in the deeds and also in all gas, water, electricity bills, to make it easier for tax inspectors to determine whether or not a house is occupied (many people rent out property but do not declare the rent paid to them.

If you are encouraged to pay with black money you can mention the points stated above. Try to always work with registered estate agents who are aware of the laws.