Advice on buying Tenerife Property
Appointing an Abogado solicitor in Tenerife
It is vital to appoint an Abogado Lawyer to assist in your Tenerife property purchase, and appoint an independent conveyancer who will then carry out all searches on the Tenerife property, obtaining all the necessary paperwork, to confirm that there are no outstanding debts or embargoes on the Tenerife property. The agency or Abogado lawyer has the responsibility to gather up-to-date receipts and to see that there are no pending debts on the property in Tenerife.
- Nota Simple (Confirmation of ownership and any mortgages or embargoes)
- I.B.I. Impuesto sobre Bienes Inmuebles (Local Tenerife Ayuntamiento council rates)
- Electricity and water receipts up to date
- Community fees receipts up to date, signed and approved by the President of the community of owners and the secretary
- Copy of the Title deed (Escritura)
An NIE number is needed to purchase a property in Tenerife.
Applying for a Bank Account in Tenerife
We work closely with all of the Spanish banks in Tenerife and can help you to open an account at the bank of your choice here in Tenerife. The cost of opening a bank account for 'non-residents of Tenerife' is around £10 for the administration fee.
Help is also on hand to set up Direct Debits for your household bills, so you have peace of mind that all your bills are being paid whilst you are not here in Tenerife.
Buying a Property in Tenerife
Once you have decided on the property you wish to purchase and the terms and conditions have been negotiated with the vendor then a deposit of 10% of the purchase price is required to secure the property and as official confirmation of your intent to purchase that property. The balance of 90% is paid on the signing of the Escritura (title deeds) before the Notary.
If you are purchasing a new construction in Tenerife then the developer will ask for stage payments to be made on the Tenerife property. These can vary dependent on the constructor. Normally an initial reservation deposit is required, this is then normally made up to 10% within 30 days of the contract date. The balance of the monies will be in stage payments, which are usually a further 30% on commencement of the foundations, 30%, once the construction reached roof level and the final 30% on completion at the time of signing the escritura (Title deeds).
Your appointed solicitor will then carry out all necessary searches on the property; to ensure that it is owned by the vendor, it has planning permission, there are no outstanding debts or charges on the property.
Once the searches on the property are satisfactorily completed and the deposit has been paid in accordance with the terms and conditions of the contract then the title deeds are signed by both the buyer and the seller before the Notary.
The Notary (Notaria)
This is a solicitor appointed by the Spanish government to witness the signing of all legal public documents. In this case the title deeds (escritura) of the property. He represents both the buyer and the seller. The Notary fees are set by law on a set scale depending on the purchase price of the property and must be paid at the time of the signing of the deeds. The Original signed document is retained by the Notary who will apply for a formal change in the Tenerife land registry. The purchaser will receive an initial legal copy of the title deed which is signed and stamped by the Notary. The official title deed can take a while to be processed and until then this is your official proof of ownership and must be kept in a secure location.
Legal Costs and Taxes of buying a property in Tenerife
These are in addition to the sales price of the property and range between 8-10% of the sale price.
They are as follows:
This is paid by the property purchaser and is a standard 6.5% (on a Tenerife resale property) tax applied to the declared value of the property. This tax must be paid within 30 days of signing the title deed. ITP Property Transfer tax is calculated on the increase in the value of the land from when it was last sold. The calculation is based on the ratable value of the property and is a 'one-off' payment.(Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados- Mod 600)of the new declared value on the deeds when buying a re-sale Tenerife property
On New Properties the Tax payable upon purchase is now 7% IGIC, Impuesto General Indirecto de Canarias (Canary Islands General Indirect Tax, similar to VAT) of the declared value on the Escritura (Title Deeds). The IGIC was previously at a rate of 5% until it was raised to 7% on 1st July 2012.
- Stamp Duty 0.5% of Mod 600
- When purchasing a New Property there is now also a document registration tax.
Impuesto sobre Actos Juridicos Documentados, known as AJD will be the amount of 0.75%. This is Stamp Duty for New Builds.
- Tenerife Notary fees - Fixed scale of charges based on the price of the property purchased
- Tenerife Property Registration Office
- Plus Valia (added value, land / capital gains tax). This is a tax levied by the Town Hall and is based on the surface area of the land,against the annual increase of the property since the previous sale, on the cadastral value and on the date of the previous escritura.
I.B.I. Impuesto sobre Bienes Inmuebles (Local Tenerife Ayuntamiento council rates) in Tenerife
This is like the old English rates system and is based on the valor catastral Catastral value of the property. The Local Ayuntamiento (Town Hall) sets the Catastral Value of a Property. The IBI are paid yearly in Tenerife and are generally much lower than the rest of Europe.
The valor catastral (cadastral value) is the rateable value of a property set by the municipal government. The valor catastral is usually much lower than the market value of the property. The cadastral value of a property can be found on Local Ayuntamientos IBI (Rates receipts).
The tax year runs from 1 January to 31 December in Tenerife, Canary Islands and Spain.
Properties on some complexes will have a community charge to cover costs of services and general maintenance, for example: the complex swimming pool, complex external lighting, community gardens, security, reception etc. Depending on the size of the development and the services offered, this can vary between 800 and 1200 per annum. Other complexes will not share services and there will be a minimal fee to cover street lighting etc. These are payable monthly or quarterly and vary dependent on the property.
RESIDENT OR NON RESIDENT
If a person resides more than 182 days in any calendar year in Tenerife, Canary Islands or Spain, then that person will be deemed a resident in Spain for tax purposes.
Persons spending less than 182 days in any calendar year in Tenerife, Canary Islands or Spain, will be deemed non-resident for tax purposes.
Impuesto sobre la Renta de no Residentes Modelo 210
THIS IS A TAX PAYABLE YEARLY WHEN YOU HAVE PURCHASED A PROPERTY IN SPAIN AND TENERIFE: Non Residents Tax payable to the Agencia Tributaria (known as Hacienda, the Tax Authorities).
This is a tax payable by persons who are Non Residents of Tenerife but own a property in Tenerife that is not their main residence.
The rate of Tax payable is 24.75%.
The rate of Non Residents Tax was increased to 24.75% from 24% from the year of 2012.
To calculate the rate payable determine the Propertys Valor Catastral (cadastral value, this can be found on Local Ayuntamiento IBI Rates receipts).
Multiply the Valor Catastral by 1.1 % if the Catastral value has been modified since 1994.
Then multiply this sum by 24.75 % and this is the amount of Tax Payable.
The Impuesto sobre la Renta de no Residentes is paid once a year for the previous calendar year.
Please note if a property is owned jointly by a married couple they must each file Individual Non Residents Tax returns.
EXAMPLE: Property worth €200,000 with a Valor Catastral (catastral value, usually much lower than Market Price) set by the local Ayuntamiento of €114,746 updated after 1994.
The tax amount to be paid to the Hacienda Tax Authority once a year is €114,746 x 1.1% x 24.75%: 312.40 €
Impuesto sobre el Patrimonio - Patrimonial Wealth TaxTHIS IS A TAX PAYABLE YEARLY WHEN YOU HAVE PURCHASED A PROPERTY IN SPAIN AND TENERIFE IF YOUR TOTAL ASSETTS ARE VALUED AT OVER 700,000 Euros.
This is a Wealth tax for anyone holding Assets and Monies over 700,000 Euros in Spain. This includes Real Estate and Funds in Bank Accounts. If you are a Non Resident this Patrimonial Tax applies only to Spanish assets.
This tax had been reduced to zero % in 2008 but has been reintroduced for the years 2011 and 2012.
The Tax is paid once a year for the previous year, ie you will pay the Tax for 2012 in 2013.
The percentage rate varies from 0.2 % to 2.5% on various thresholds, on assets over the basic threshold of 700,000 assets.
Please note if a property is owned jointly by a married couple they must each file Patrimonio Tax returns.
As a husband and wife will file individual tax returns if a property and assets are in joint names, this allows 1,400,000 Euros.
The Patrimonial Tax is calculated on whichever is the Highest value of:
1. Escritura (Title Deed) - the price declared on your Escritura
2. Valor Catastral - >The valor catastral (cadastral value) is the rateable value of a property set by the municipal government. The valor catastral is usually much lower than the market value of the property. The cadastral value of a property can be found on Local Ayuntamientos IBI (Rates receipts).
FREQUENTLY ASKED QUESTIONS
What is a sales agreement?
A private document signed between the buyer and seller.
It must reflect ownership of the property, legal definition of the property, the exact dates of deposits and completion, currency of the transaction (euros, pounds etc) and penalty clauses.
What happens if there is a mortgage on the property I want to buy in Tenerife?
When we sell a property in Tenerife do we have to pay tax?
a) Tax regulations in Tenerife require the buyer to withhold 3% of the price on the escritura and to pay it to the tax office when buying property from non-resident of Tenerife vendors.
A cost when you sell a property in Tenerife if you are Fiscally a non resident is a 3% tax retention of the total sales price of the property which is enforced by the Spanish Tax Authorities to pay your capital gains tax and any other outstanding taxes. This procedure is carried out in order to ensure that you have no public or private debts pending within the Spanish territory. Once the Spanish tax authorities have been paid any of your outstanding tax debts out of the 3% retention, your Fiscal Representative can apply for a rebate of the balance of the monies, less your Capital Gains and tax bill.
b) Capital Gains
Certificado de Eficiencia Energetica CEE -Energy Performance Certificates EPC
The Spanish Government has passed a new Energy Efficiency Law, Royal Decree 235/2013 Of The 5th April 2013.
The Royal Decree states that Certificado de Eficiencia Energetica (CEE) (Energy Performance Certificate EPC) will become a Legal requirement for properties in Tenerife and throughout Spain that are advertised for sale from the 1st June 2013.
All Sellers must by Law be able to present this Certificate to prospective purchasers and to the Notary.
The energy rating label must also be included in any advertising or marketing including on estate agents websites.
Whilst we endeavour to ensure that the information on buying and selling Tenerife is correct at the time of publishing this information is intended for guidance only
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