Tax implications on a private equity release/house purchase in Valencia

I am considering purchasing a resale property in the Comunidad Valenciana, however this purchase is not a straightforward one.

The property in question is owned by a very good friend of the family (she has been close friends with my parents for over 40 years!) who was widowed a few years ago. Today she finds herself in the position whereby her income from pensions would be sufficient to cover her living costs if she didn't have some debts/loans to repay. As she has no direct family to leave the property to upon death, she is interested in releasing equity from her house in order to repay her debts in full and leave her with some extra capital so she can enjoy life that little bit more.

Whilst she is able to do an equity release with a number of companies, I have said that I would be willing to enter into a similar arrangement with her.

The high level details of this agreement would be as follows:

- I would pay her the sum of €70,000 for the property, which has a current market value of approximately €175,000.
- In return for this lower price, I will grant her a free lifetime tenancy at the property, with her remaining responsible for all running and upkeep costs (e.g. utility bills, community fees, general maintenance etc.)

There are obviously risks for both parties in doing this, however given the longstanding family friendship, which has always been very close over the years, we both are comfortable and confident that neither of us are going to do anything untoward to the other.

For me this is an investment with my risk clearly related to how long she will live after the sale is completed and the agreement is done. However given she is already in her mid-70s and not in particularly good health, I feel that this is fairly low risk and one I am willing to take.

My question relates to how to legally perform such a transaction, particularly in relation to how much to declare as the sale value (which in effect would be €70,000) without it appearing to the Spanish tax authorities that incorrect values are being declared (i.e. black money is also being exchanged - which it isn't) and therefore potentially attracting a fine.

I am also keen to understand whether or not I would have any ongoing tax liability aside from the 'normal' taxes such as IBI/SUMA, e.g. tax on notional rental income as an offset against the lower purchase price, as this is important for me to understand and take into consideration

Many thanks