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Post by Andy 2 on Jul 16, 2004 9:05:37 GMT 1
I have just found an ideal piece of land in Croatia. I have just been informed by the owner that he wishes the deal to be in cash and that the price be stated somewhat lower than the asking price in the legal documentation. However, the owner will state that it was paid for in full and waive any legal right once the contract is signed.
The reason for this is for his tax reasons.
My independent contact in Croatia, in whome I have total confidence, assures me that this is normal practice, and the governement independently values the land to levy tax on the owner. He has also checked out the plans with the planning office and checked out the documentation with legal sources.
Does anyone have any views or experience of this type of practice ?
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Post by Anja on Jul 16, 2004 9:18:56 GMT 1
When you complete your contract then you have to present the contract to the tax office within one month. The tax office then sends a valuator to valuate your property and the value of the property purchase tax should be 5% of the price paid. Sometimes agents/ owners make two contracts for you: one with the real price paid, other with a lower price so you can present a lower price contract to the tax office and lower your 5% tax. Even the valuator will set 5% tax not on the basisi of price but on the basis of ther valuation price if you have a contract with a lower price then you can complain to the tax office and very often they lower the price to match the 5% of the contract price. It also could be that the owner has bought the land in last three years and if he is selling it to you now then he is liable for 35% tax on profit. The third case is when the real owner is abroad, then the agent doesn't want to show him the real price and makes few pounds on it by stating the lower price in the contract. Your contact in Croatia is right: this practice happens very often in Croatia.
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Post by Graham - Bosmere on Jul 16, 2004 9:41:21 GMT 1
Whilst it may not be a problem in Croatia, you might fall foul of the investigative powers regarding money laundering in the UK if you are based here. Banks and businesses have an obligation to report large cash movements and transactions. I am not sure of the exact regulations, but I know that as a business we would never make a cash payment for anything except when paying with petty cash for small items.
There are all sorts of things that might have knock on implications such as capital gains tax etc. Best advice is run it all past a good accountancy practice in the UK to make sure all is OK
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Post by Andy 2 on Jul 17, 2004 16:36:36 GMT 1
Anja, you are correct. The owner has bought the land in the last three years. What concerns me now is the requirement for a cash deal. Are there any implications with this arrangement ?
The deal will be through a UK bank SWIFT transfer to Banka Dobrovacka
Are they likely to inform the governement therefore leaving me liable to investigation?
By the way, as this is in the Dubrovnik Area and within the regeneration area 5% purchase tax is not applicable, verified by the Solicitor and the Planning Office
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