Buying property in Tenerife: costs, taxes and the process

What buying costs

Taxes and fees come on top of the price. As a rule of thumb, allow approximately 10% of the price. The exact figure depends on whether the property is a resale or a new build, and on the price.

Transfer tax (ITP) on a resale

The Impuesto sobre Transmisiones Patrimoniales is paid by the buyer within one month of signing the deeds. The general rate in the Canary Islands is 6.5%.

Since 1 January 2022 the tax is worked out on the Catastro's reference value for the property (valor de referencia), or on the price you paid if that is higher. A bargain can therefore still be taxed on the reference value. Your lawyer will check the reference value before you commit, and it can be challenged.

The Canary Islands also has reduced rates for buying a main home, including for younger buyers, large families, single-parent families and people with a disability. They come with price and income limits that are revised in the Canarian budget, so ask your lawyer whether you qualify.

IGIC and stamp duty on a new build

A new property bought from the developer carries IGIC, the Canary Islands general indirect tax, at 7% of the price instead of transfer tax. Stamp duty (Actos Jurídicos Documentados, AJD) is added on top.

Your abogado and the checks

Always appoint your own independent lawyer (abogado). If you do not have one, we can introduce you to an English-speaking lawyer who will handle the purchase for you.

Before completion your lawyer will obtain and check:

• the Nota Simple from the Land Registry, which confirms who owns the property and whether there are mortgages or charges (embargos) on it
• the last IBI receipt (the yearly council tax set by the town hall, the Ayuntamiento)
• up-to-date electricity and water receipts
• a certificate that community fees are paid, signed by the president and the secretary of the community of owners
• a copy of the title deeds (escritura)
• the energy performance certificate

A good lawyer will also check with the town hall that there are no planning problems, and that the property described in the deeds matches what is registered at the Land Registry and the Catastro.

Choosing a property lawyer in Tenerife

Your lawyer should act for you alone. Use an independent abogado rather than one acting for the seller or the developer, and choose someone who explains each step clearly.

• Agree the fee in writing before the work starts, and ask what it includes.
• Let the lawyer finish the Land Registry, town hall and community checks before you pay anything beyond the deposit.
• Ask the lawyer to check the reference value used for transfer tax, and whether any reduced rate applies to you.
• If you cannot be in Tenerife for the signing, the lawyer can act for you under a power of attorney.

If you do not have a lawyer yet, we can introduce you to an independent, English-speaking abogado.

NIE number and bank account

You need an NIE (Número de Identidad de Extranjero) to buy property in Spain. In Tenerife it is issued by the Policía Nacional: you book an appointment online and attend with your passport, form EX-15 and proof that you have paid the fee on form 790-012. Your lawyer can arrange it for you, including under a power of attorney.

You will also want a Spanish bank account to pay the purchase and to set up direct debits for your bills. We can help you open one.

From offer to keys

1. Viewings. We ask buyers to see a property twice, on different days. The second visit shows things the first one does not.
2. Offer and deposit. Once the price and terms are agreed, a private purchase contract is signed, in Spanish and English, and you pay a deposit, normally 10% of the price.
3. If either side pulls out. With the usual form of deposit contract (arras penitenciales), a buyer who withdraws loses the deposit, and a seller who withdraws pays back double. Your lawyer will explain the exact terms before you sign.
4. Searches. Your lawyer carries out the checks above while you arrange the rest of the money.
5. Completion at the notary. The buyer, the seller or their representatives, and a bank representative if a mortgage is being cancelled or taken out, sign the new escritura before the notary. The notary checks identities, the seller's right to sell and the up-to-date registry position, and the balance is paid, usually by banker's draft.
6. Keys and registration. You receive the keys and an authorised copy of the deed. The deed is then registered in your name at the Land Registry, and the taxes are paid.
7. After completion. Utilities, IBI and community fees are moved into your name and set up on direct debit.

If you cannot be in Tenerife for the signing, you can give your lawyer a power of attorney to sign for you.

Buying a new build

For a property still under construction, the developer usually asks for a reservation deposit and then staged payments, with the balance paid when the deeds are signed on completion. The schedule varies by developer. Your lawyer should confirm that your payments are protected by a bank guarantee or insurance, as Spanish law requires for off-plan purchases, and check the building licence.

Yearly costs of owning

• IBI: the yearly council tax, based on the cadastral value (valor catastral) set for the property. The valor catastral is shown on the IBI receipt and is usually well below the market value.
• Basura: the rubbish collection charge from the town hall.
• Community fees: these pay for the pool, gardens, lighting, and on some complexes a reception or security. They vary widely from complex to complex, so we confirm the figure for each property before you commit.
• Electricity and water: metered and billed to your Spanish bank account. There is a standing charge whether or not you are there.
• Insurance: home insurance is worth having, and a lender will require it.

Non-residents tax (Modelo 210)

You are tax resident in Spain if you spend more than 183 days here in a calendar year. If you are not resident and own a Tenerife property that you do not rent out, you pay a yearly tax on an imputed income from it, declared on Modelo 210.

The imputed income is a percentage of the property's cadastral value: 1.1% where the town hall has revised its cadastral values in the last ten years, or 2% where it has not. The tax rate depends on where you are resident:

• 19% for residents of the EU, the EEA, Iceland, Liechtenstein and Norway
• 24% for residents of other countries, which has included the United Kingdom since Brexit

Example. A property with a cadastral value of €114,746, in a municipality that revised its values in the last ten years:

• UK or other non-EU owner: €114,746 × 1.1% × 24% = €302.93 a year
• EU, EEA, Icelandic, Liechtenstein or Norwegian owner: €114,746 × 1.1% × 19% = €239.82 a year

Each owner files separately, so a couple who own a property jointly each file a return for their share. If the property is rented out, rental income is declared instead, under different rules.

Wealth tax

Wealth tax (Impuesto sobre el Patrimonio) can apply where a person's net assets in Spain exceed €700,000. The Canary Islands applies the state scale, which runs from 0.2% to 3.5%. Residents also have a further allowance of up to €300,000 for their main home.

Non-residents are assessed only on their assets in Spain. Spouses are assessed separately, so a jointly owned property is split between them and the €700,000 threshold applies to each.

A return must be filed if tax is payable, or if the gross value of the assets is over €2,000,000 even when no tax is due. The temporary solidarity tax on large fortunes can also apply to taxable wealth above €3,000,000 after the €700,000 allowance; wealth tax already paid is credited against it.

This guide is general information and not legal or tax advice. Tax rates and allowances change with each budget, so confirm the figures that apply to you with your lawyer or tax adviser before you commit. Selling? See the costs of selling in Tenerife.