Our (Spanish but English-speaking) estate agent claims that in Spain everybody pays a part of the final sales price in cash. She calls the cash payment "black money". The sellers of the chalet we want to buy have accepted our offer, but want us to pay 20% agreed price in cash. Our estate agent is encouraging us to agree but we feel uneasy about handing over a big wad of notes and receiving no receipt. What would you advise us to?

Your estate agent is right, it is common practice in Spain to "camouflage" the real sale price, although recent legislation makes it more difficult to do so than it used to be. Even though black money continues to change hands in the majority of second-hand property deal in Spain, it is very much against the law and you need to be aware of that when you make your decision. Your estate agent will encourage you to agree because she may have agreed with the vendors that her commission on the sale will be paid to her in cash too, taken directly from the cash paid by the buyer during the sale. It sounds very wheely and dealy written down like that, but the property market in Spain boomed at a time when legislation was not prepared for a thriving real estate sector, and things like black money payments reflect this perculiarity.

Cash payments in effect become "invisible" (and therefore "black") during the property sale because they are not mentioned in the deeds and do not figure in the sales contract. They are usually handed over during the signing of the contract. The "black" or "undeclared" money has advantages for the property vendor, because it means he/she will pay less capital gains tax on the sale of the property because the price that figures in the deeds is lower than the money which has really changed hands (i.e. deed price + cash) and this in turn means that the vendor's taxable profit is also lower.

While many British people are taken aback when they initially find out about the role of black money in Spanish property deals, most of them go ahead with their purchase, even though they have nothing really to gain by paying part of the price in cash. On the contrary, you should bear in mind that because the price of the purchase described in the deeds is lower than the price you have actually paid, your own capital gains tax will be higher when you sell the property in the future (assuming you don't want to break the law when you sell). Buyers must bear this in mind, especially if they are buying the property as an investment and intend to resell quite soon.

You could negotiate with the vendors the sum of cash you are prepared to pay - 20% is above the norm. You must also ask for a receipt of the cash payment arguing that you need one for your personal accounts. Or you could look around for a seller prepared to declare 100% of the real price paid.