Why you should refuse undeclared cash (dinero B) in a sale

Key rules

• Reference value: Since 1 January 2022, transfer tax uses the highest of declared price, market value and Catastro reference value.
• Mortgage: The bank lends on the lower of deed price or appraisal, so you fund any gap yourself.
• Cash limits: Cash is capped at 1,000 euros where a business or professional is involved, and 10,000 euros for non-residents not acting as businesses.
• Criminal threshold: Tax fraud becomes a crime when unpaid tax exceeds 120,000 euros in a tax period.
• Resale: Only the declared price counts as your cost, so a low deed raises your taxable gain later.

The bottom line

Refuse any request to declare a lower price than you really pay. The seller may offer a saving, but the risk falls mostly on you, and the authorities can now spot a low price easily.

Why a low price is easy to spot

The tax office compares the price in the deed with its own valuation. Since 1 January 2022, the tax on a resale purchase (ITP) and similar taxes use the highest of three figures: the declared price, the market value and the Catastro valor de referencia. The Catastro sets this reference value from market data for each property. A deed well below it will not lower your tax bill.

Notaries also record how the price was paid and report the payment methods. Cash and untraceable payments get flagged. Notaries report suspicious deals through their anti-money-laundering unit.

You can look up the reference value for the property on the Catastro website before you agree a price. The documents box below shows what to collect.

Tax risk for you

If the declared price is lower than the real price, you can face a reassessment on the higher value, plus interest and penalties. The seller faces capital gains tax and penalties on the hidden part. Undeclared payments can also lead to questions about where your money came from.

If you think the reference value is too high, you can ask for a correction, or file the return with your declared value and then challenge the assessment. The FAQ below covers this.

Mortgage risk

The bank lends on the deed price or the appraisal, whichever is lower. If the deed shows less, you must fund the gap with your own money, and that money is hard to document.

Proof and title risk

The hidden part is not in the deed, so you have little proof you paid it. The registry records the deed price, not the real one. If the sale falls through, you may struggle to recover the extra money, because a court may treat the contract as simulated or partly void.

Higher tax when you sell

Your acquisition cost for a later sale is the price declared in the deed. A lower declared price makes your taxable gain larger. You cannot normally count the undeclared money as cost without proof, and you will have none.

Cash limits and criminal risk

Cash payments are restricted. The limit is 1,000 euros when a business or professional is involved, and 10,000 euros for non-residents who are not acting as businesses. Breaking the limit can bring a fine, often set as a share of the amount paid.

Tax fraud becomes a criminal offence when the unpaid tax in one tax period exceeds 120,000 euros. Below that, penalties are administrative. If you cannot show where your funds came from, anti-money-laundering rules add more risk.

What to do instead

• Insist the deed states the full real price and how it was paid.
• Pay by bank transfer, so there is a record.
• If the seller will only sell for undeclared cash, walk away or take advice from an independent lawyer.

Documents you need

• Catastro reference value (valor de referencia) for the property, from the Catastro website or its online office, to compare with the price in your deed.

• Signed deed showing the full real price and how it was paid, from the notary. It is your main proof of what you paid and what the bank and registry record.

What to watch out for

• Tax reassessment and penalties: The tax office can reassess your transfer tax on a higher value, with interest and penalties. Since 2022 the base is at least the Catastro reference value, so a low declared price is easy to spot. The seller also faces tax on the undeclared part. Declare the real price in the deed and check the Catastro reference value before signing.

• Mortgage gap you must fund yourself: The bank lends on the lower of the deed price and its appraisal, so you cover the difference with your own money, which is hard to document. Ask your bank how much it will lend against the real price before agreeing any lower figure.

• Weak proof and a higher gain on resale: Undeclared money does not appear in the deed. If the sale is cancelled, you may struggle to recover it because the contract may be treated as simulated or partly void. On resale, your cost is the deed price, so your taxable gain is higher. Pay the full price through traceable bank transfers and make sure the deed states it.

• Cash limits, notary reporting and criminal risk: Notaries record how the price was paid and report suspicious payments, and cash above the legal limits can bring fines. Tax fraud is a criminal offence when the unpaid tax exceeds 120,000 euros in a tax period. If you cannot show where the money came from, anti-money-laundering rules add more risk. Refuse any request to pay part in cash and keep proof of where your funds came from.

Frequently asked questions

Can I challenge the Catastro reference value if I think it is too high?

Yes, you can challenge the Catastro reference value (valor de referencia) if you disagree with it. You can ask for a correction, or file the tax return with your declared value and then challenge the tax assessment. Either request goes to the regional tax office.

What happens to my tax on resale if I paid part of the price in cash?

Your taxable gain on resale will be higher, because your cost is the price declared in the deed. Money paid under the table cannot normally be counted as purchase cost without proof.

At what point does understating the price become a crime?

Tax fraud becomes a criminal offence when the unpaid tax is more than 120,000 euros in a tax period. Below that, it is treated as an administrative penalty.

Will the bank lend me more if the deed shows a lower price?

No, the bank lends against the lower of the deed price and its appraisal value.