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:
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.
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 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.
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.