Taxation on Property Tenerife

taxation on property tenerife

NB The information here is a guide only. All property matters should be dealt with by a professional

Let's start at the very beginning - buying a property. After all, this is when most of the tax involved will be payable.

Purchasing a New Build

If you are buying a brand new property direct from the developer, the sale will incur a local IGIC (VAT) tax of 5% of the property value. This is paid to the developer when documents are exchanged at the Notary.

Alternatively, you can pay this tax in increments as the property is being built.

There is also a property transfer tax, which, for a new build, is 0.05%. This has to be paid within 30 days of the signing of the deeds and will normally be dealt with by your solicitor or estate agent.

Purchasing a Second Hand Property

Although there is no 5% IGIC to pay, a resale property will incur a transfer tax of 6.5%. This is also payable within 30 days of signing the deeds.

Performing a Search

If you're buying a second hand property, you need to appoint a professional (i.e. solicitor or estate agent) to perform searches on the property.

The prime reason for this is to check if there are any outstanding bills not paid by the vendor. These may include land registry fees, community fees, local rates, electricity, water and rubbish collection.

Any unpaid bills, if not taken care of by the vendor, will, on signing of the deeds, become your responsibility.

Other Fees Incurred on Purchase

As the Escritura (title deeds) must be signed in the presence of a Notary, he will incur a fee. This is proportional to the value of the property and, once it is paid, the Notary will give you the original Escritura plus four copies.

There is another fee for having your name registered as the new owner of the property and a "document tax" of 0.75%.

taxation on property tenerife

Land Registry Fees

These are also relative to the value of the property and are payable upon receipt of the Escritura from the Notary.

Plus Valia Tax

You must attend to this issue before signing any deeds. This is a local tax, calculated, quite arbitrarily, by sundry town council officials, based on their estimation of how much the value of the land on which your potential property stands has increased.

It is, theoretically, the vendor's responsibility to pay this and, in most of Spain, that is the case. However, in Tenerife, the Tax Office will pursue the buyer - you - for this payment (because of the possibility, I suppose, that the vendor may have left the island).

So, you see what I mean. It'll be your responsibility - get it sorted before signing anything!

taxation on property tenerife

IBI Tax

This stands for Impuesto sobre Bienes Inmuebles and could be considered a "property tax". It is, once again, dependant on the value of the property and other factors are taken into consideration, such as the age of the building and its size and location.

Naturally, this leads to substantially varied amounts for different municipalities. It is payable annually, during the first half of May.

Town Councils are supposed to send you notice to pay this tax, but don't count on it.

It is considered your responsibility to find out how much there is to pay - not to mention where to pay it. Failure to do this incurs a fine of 20%, added onto the tax bill.

Something To Beware Of

Some years ago, it was accepted practice for vendors to under value their property, purely for tax purposes. The point of this was to avoid paying capital gains tax on any perceived profit they gained from the sale. Everyone did it - the taxman turned a blind eye.

Not any more!

If a vendor (or, indeed, his solicitor or estate agent) wants you to accept an undervaluation for his property, whilst still paying the full amount - run a mile!

The Tax Office is now rebelling against this practice. It wants its money. The taxman will hunt you down and find you. The Tax Office will make its own estimation of the property's value and you'll be hit with a hefty tax bill - which could be backdated. Action may also be taken against you for tax evasion.

taxation on property tenerife