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When you buy a new (ie direct from a developer) property in Tenerife,
IGIC (VAT) of 5% is payable on the value declared on the Escritura
(Title Deeds) and is collected by the developer on signing at Notary.
In addition, Property Transfer Tax (Impuesto Sobre Transmisiones
Patrimoniales) of 0.5% is payable within 30 days of signing (attended
to by your Estate Agent or Solicitor).
On re-sale properties, Tenerife Property Transfer Tax (Impuesto Sobre
Transmisiones Patrimoniales) is 6.5% and is payable within 30 days of
signing (attended to by your Estate Agent or Solicitor).
Notary Fees in Tenerife
The Notary, who prepares the property's Escritura (Title Deeds), is
obliged by law to carry out a full search of the property prior to
signing it over to the new owner(s). In addition to explaining the
process to the prospective owner(s), he will answer any queries on
legal matters regarding the purchase. Before you arrive at the Notary, your
Estate Agent will also have undertaken all the searches necessary (such
as Local Rates, Rubbish, Electric and water, and Community Fees) to
ensure that there are no debts or encumbrances registered and that
‘clear title’ is transferred to you on the day of signing.
A Notary’s Fees increase according to the value of the property and the
length of the deeds. For example, on a €75,000 property sale, the fee
would be approximately €325 (these can vary from one Notary to
another). A few days after you sign and pay his Fee, The Notary will
provide you with an original copy of the Escritura (Title Deed) plus 4
Copias Simple (copies).
Land Registry (Registro de la Propiedad) Fees
These also increase according to value, and on the transaction
mentioned earlier (€75,000 sale), amounted to €188. Land Registry Fees
are paid when you collect your original copy of the Title Deed after
registration (which takes at least a month and often more).
Plus Valia Tax
This is a Local Tax payable on the sale of a property in Tenerife,
calculated on Town Hall tables, and based on their perceived increase
in the value of the land on which the property is built during the
vendor’s period of ownership, and collected by the Town Hall. Hence, it
is both morally and legally attributable to the Seller of the property. In reality, the Tax Man will seek to collect payment from the Buyer of
the property, as the Seller may well have left the island. Make sure,
therefore, that your adviser addresses this Tax BEFORE going to the Notary!
For example, if you own an apartment, you own a percentage of the
plot of land upon which the complex, and therefore your apartment, is
built, making you liable for this tax on its sale (Plus Valia Tax is
not normally levied on rural land).
Clearly therefore, the longer the property has been owned, the higher
the tax payable will be (on a a simple one bedroom apartment sold after 22 years
the tax was €1,750. On a similar property sold after a little more than
a year it was just €95).
The law states that unless mentioned otherwise on the Title Deed, the
vendor must pay this tax. However, it is normal practice in the Canary
Islands for the buyer to pay (as mentioned earlier).
When the amount due is substantial, your Estate Agent will very likely
suggest that you negotiate with the Vendor. To establish the actual
amount of the Plus Valia a copy of the new Escritura (Title Deeds)
should be taken to the appropriate Town hall within 30 days of signing
- but it is possible to request the calculation and pay the tax
immediately. Alternatively you can ask to be notified once the
calculation has been prepared although this can take many months.
Other Regular Costs and Taxes incurred when you buy a property in Tenerife
There are several items that are paid on a regular basis:
Community Fees
If your property is in a complex or apartment block, you will be
required to contribute towards general maintenance and running costs,
such as cleaning, re-painting, swimming pool maintenance, security and
so on. The amount will depend on how large the complex is, where and
how large your property is, how much work and costs are required to
maintain the complex and how much you and your fellow owners agree to
contribute. These Fees are collected every 1, 2 or 3 months, normally
by direct debit from your Bank account.
Utility Bills
Electricity and Water bills are paid every two months - normally by
direct debit from your Bank account. Gas is bottled and can be bought
at some petrol stations or local hardware stores and can sometimes be
delivered by ordering over the phone. Rubbish bills are normally paid
every six months - if you live on a complex some, or all of these bills
may be included in your regular Community Fees.
Local Rates
Local Rates are paid annually and, depending on where your property is
situated, they are levied between May and November for the whole of the
current calendar year. The authorities will send you notification of
when and how much you owe. However, these notifications often do not
arrive, so please make sure you find out when they are due to be paid
in your area and go to the local office of the Catastro (Rates
Authorities) to pay if the notification has not arrived. Local Rates
are considerably lower than in the UK and Europe in general, for
example, on a typical 1 bedroom apartment in Las Americas, they are
approximately €115 each year; on a 3 bedroom apartment in Los
Cristianos around €225 per year; while on a 3 bedroom townhouse outside
Adeje they are €128 per year.
Taxes
For Non Resident property owners there are two taxes payable each year:
- Wealth Tax (Impuesto Sobre el Patrimonio)
-
Income Tax (Impuesto Sobre la Renta)
Wealth Tax is calculated on a sliding scale, starting at 2 ‰ (which
applies to most owners) of either the property's Escritura value or its
Valor Catastral (Rateable Value) whichever is the higher.
Income Tax is charged at 25% of either 1.1% or 2% (depending on where
the property is situated and only applying to those who do not receive
any income from their property) of the higher of either the property's
Escritura value or Valor Catastral (Rateable Value). For owners renting
their property out, the Tax rate is 25% of the gross rental income.
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