February 12, 2007--Monday on Mallorca: The Unofficial Price
When buying a flat or house on Mallorca, there are at least three ways to do so—the “official” way, the “unofficial, or a combination of both. The official way is a version of what we in America would call on-the-books; the unofficial, off-the-books; and the third, most common way, is a mix of a little of this and a little of that. These methods were created so that Mallorquins, and those with whom they do business, would have various ways to deal with cash and how, as much as possible, to avoid taxation—at the time of purchase, when selling, and of course after death.
These are among the Mallorquins very favorite subjects—dinero, impuestos (taxes), and muerte.
At the risk of who knows what, I will confess, and of course deny, that when we purchased our flat six years ago, for pesetas—before the Euro had been introduced—we opted for the latter. Not because we understood any of the implications but rather because we did whatever Carlos, our real estate agent told us to do.
With an ironic smile that he hoped might blunt our reactions, as true-blue Americans, to his fellow Mallorquins "quaint" customs, he said, deposit millions and millions of pesetas in a Spanish bank account (millions not just because it was a nice apartment and was a splurge but mainly because of the peseta-to-dollar exchange rate) and then on the day of the closing meet him at the bank and he would tell us what to do.
On the appointed day we met at the bank’s branch office in the small town of Peguera and he sat us down at a small table in the middle of a very open small office where we were shortly joined by the bank manager who was carrying a very large battered suitcase. After introducing himself, Senior S____ plopped the case onto the table, popped the latch, and jumped back as the lid exploded open as the mounds of pesetas stuffed in it, now freed, poured out onto the table and floor.
Other customers drifted in and out not even glancing in our direction though we were in very plain view surrounded by mountains of cash. We were told to begin counting and to make 50,000 peseta bundles, securing each with a rubber band. With the help of Senior S____ and Carlos it took us more than half an hour to get the job done.
At that point we were directed to stuff the now neat stacks of cash into an attaché case and two plastic shopping bags from a local market that Carlos provided. And then with him driving nervously we went to meet the sellers at the Notaria’s office.
Again we made introductions and were soon escorted into a wood-paneled, book-lined office where, enthroned at the head of a huge conference table, sat the regal Notaria, who did not feel the need to introduce himself.
He read the contract in both Spanish and English. Our Spanish was such and his English was such that we had no idea whatsoever what it said or required. But when it came time to pay for the flat and the assorted fees, the Notaria was careful to make sure that all his instructions were perfectly clear and easy to follow—
First, he told us, take three of the bundles of cash and place them on the table toward where he had established himself--he did this by nodding and pointing so as to insulate himself from this, to him, the most essential part of the process; then he said take two other bundles and slide them over to where the real estate agent was seated--Carlos was not reluctant to quickly put them into his now empty atache case; and next, we were told, make a stack of all that remained and hand it to the sellers, who were from Düsseldorf; and finally, at least in regards to the “unofficial” part of the process, everyone was instructed to again count all the pesetas. Since so many people were involved in the counting, this time it took only 15 minutes.
The Notaria’s three bundles, however, remained where they were, untouched, uncounted.
Then we proceeded to the “official” part of the transaction—from his inner jacket pocket Carlos withdrew a bulging envelope and from it extracted a number of bank checks, which we were directed to sign. This took but a minute—there were only nine of them. These Carlos walked over to the head of the table and actually handed them to the Notaria. Unlike the bundled cash still sitting on the table in his proximity, he took the checks in hand and distributed them to the various parties, the last of whom was himself.
With that we were done; and after affixing his embossed seal to numerous papers, with a waive of his hand, the Notaria dismissed us and we were the proud owners of a flat on Mallorca.
Back in the outer office, the couple from Düsseldorf handed their two stuffed shopping bags to a man who we hadn’t noticed before who, with the bags clutched to his chest, raced from the office, jumped into a waiting Mercedes, and sped off with a squeal of burning tires.
We later learned that two of the nine checks were made out to the municipal authorities and were for the transfer tax on the “official” price. We also learned that the reason the Notaria was so handsomely rewarded with both cash and a check was that he and he alone had the responsibility and power to establish the official price and thus what would be owed by us in taxes.
We also learned that the man with the Mercedes was someone who would convert the pesetas into Deutschmarks, that this was an essential kind of service in much of the world where many people did not trust institutions such as governments and banks and thus needed to find ways to live with hoards of cash.
We also learned later what was in the contract—including that Rona and I were 50-50 partners in the flat and that among the papers we signed were Spanish wills which authorized the transfer of each of our shares when and if one of us died. And that when the inevitable happened, the survivor, Rona to be sure, would have to pay capital gains taxes, if there were any, on the appreciated value of my half of just the “official” price. That is, unless Rona chose not to tell the authorities about my passing for three years, seven weeks, and five days; at which time she would not have to pay any taxes at all. It wasn't clear, however, if I would have to be kept on Mallorca, on ice, for all that time. But if so, if that were necessary to avoid capital gains taxes, no problemo.
We also learned, just this week, that the mayor of our town and his henchmen have all been tossed in jail, without bail, because of various forms of hanky-panky in transactions of this very kind.
So who knows where I will be reporting from next week.
These are among the Mallorquins very favorite subjects—dinero, impuestos (taxes), and muerte.
At the risk of who knows what, I will confess, and of course deny, that when we purchased our flat six years ago, for pesetas—before the Euro had been introduced—we opted for the latter. Not because we understood any of the implications but rather because we did whatever Carlos, our real estate agent told us to do.
With an ironic smile that he hoped might blunt our reactions, as true-blue Americans, to his fellow Mallorquins "quaint" customs, he said, deposit millions and millions of pesetas in a Spanish bank account (millions not just because it was a nice apartment and was a splurge but mainly because of the peseta-to-dollar exchange rate) and then on the day of the closing meet him at the bank and he would tell us what to do.
On the appointed day we met at the bank’s branch office in the small town of Peguera and he sat us down at a small table in the middle of a very open small office where we were shortly joined by the bank manager who was carrying a very large battered suitcase. After introducing himself, Senior S____ plopped the case onto the table, popped the latch, and jumped back as the lid exploded open as the mounds of pesetas stuffed in it, now freed, poured out onto the table and floor.
Other customers drifted in and out not even glancing in our direction though we were in very plain view surrounded by mountains of cash. We were told to begin counting and to make 50,000 peseta bundles, securing each with a rubber band. With the help of Senior S____ and Carlos it took us more than half an hour to get the job done.
At that point we were directed to stuff the now neat stacks of cash into an attaché case and two plastic shopping bags from a local market that Carlos provided. And then with him driving nervously we went to meet the sellers at the Notaria’s office.
Again we made introductions and were soon escorted into a wood-paneled, book-lined office where, enthroned at the head of a huge conference table, sat the regal Notaria, who did not feel the need to introduce himself.
He read the contract in both Spanish and English. Our Spanish was such and his English was such that we had no idea whatsoever what it said or required. But when it came time to pay for the flat and the assorted fees, the Notaria was careful to make sure that all his instructions were perfectly clear and easy to follow—
First, he told us, take three of the bundles of cash and place them on the table toward where he had established himself--he did this by nodding and pointing so as to insulate himself from this, to him, the most essential part of the process; then he said take two other bundles and slide them over to where the real estate agent was seated--Carlos was not reluctant to quickly put them into his now empty atache case; and next, we were told, make a stack of all that remained and hand it to the sellers, who were from Düsseldorf; and finally, at least in regards to the “unofficial” part of the process, everyone was instructed to again count all the pesetas. Since so many people were involved in the counting, this time it took only 15 minutes.
The Notaria’s three bundles, however, remained where they were, untouched, uncounted.
Then we proceeded to the “official” part of the transaction—from his inner jacket pocket Carlos withdrew a bulging envelope and from it extracted a number of bank checks, which we were directed to sign. This took but a minute—there were only nine of them. These Carlos walked over to the head of the table and actually handed them to the Notaria. Unlike the bundled cash still sitting on the table in his proximity, he took the checks in hand and distributed them to the various parties, the last of whom was himself.
With that we were done; and after affixing his embossed seal to numerous papers, with a waive of his hand, the Notaria dismissed us and we were the proud owners of a flat on Mallorca.
Back in the outer office, the couple from Düsseldorf handed their two stuffed shopping bags to a man who we hadn’t noticed before who, with the bags clutched to his chest, raced from the office, jumped into a waiting Mercedes, and sped off with a squeal of burning tires.
We later learned that two of the nine checks were made out to the municipal authorities and were for the transfer tax on the “official” price. We also learned that the reason the Notaria was so handsomely rewarded with both cash and a check was that he and he alone had the responsibility and power to establish the official price and thus what would be owed by us in taxes.
We also learned that the man with the Mercedes was someone who would convert the pesetas into Deutschmarks, that this was an essential kind of service in much of the world where many people did not trust institutions such as governments and banks and thus needed to find ways to live with hoards of cash.
We also learned later what was in the contract—including that Rona and I were 50-50 partners in the flat and that among the papers we signed were Spanish wills which authorized the transfer of each of our shares when and if one of us died. And that when the inevitable happened, the survivor, Rona to be sure, would have to pay capital gains taxes, if there were any, on the appreciated value of my half of just the “official” price. That is, unless Rona chose not to tell the authorities about my passing for three years, seven weeks, and five days; at which time she would not have to pay any taxes at all. It wasn't clear, however, if I would have to be kept on Mallorca, on ice, for all that time. But if so, if that were necessary to avoid capital gains taxes, no problemo.
We also learned, just this week, that the mayor of our town and his henchmen have all been tossed in jail, without bail, because of various forms of hanky-panky in transactions of this very kind.
So who knows where I will be reporting from next week.
posted by Steven Zwerling at
2:25 AM
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