TIPS FOR PURCHASING PROPERTY IN TENERIFE
Tenerife Property Purchases – Selecting Your Abogado Solicitor
When it comes to purchasing Tenerife property, it really is crucial to find the right Abogado lawyer. This type of professional will conduct comprehensive searches on the property chosen, secure required paperwork, ensure that the property is not encumbered by any debts and more. An Abogado appointed to handle such a matter will make certain that all details are handled in advance of the transfer.
Tenerife Estate Agent Tips – Key Points To Be Addressed
A Nota Simple, or proof of ownership and encumbrances must be obtained.
Documentation of Tenerife Ayuntamiento rates (Impuesto sobre Bienes Inmuebles) must be obtained.
All water and electricity bills and receipts need to be current.
Title deed, or Escritura, must be secured.
Proof of up-to-date payment of community fees, acknowledged in writing by the owners’ community president and secretary must be secured.
Escritura, or Title Deed must be obtained.
Numero de Identificacion de Extranjeros (NIE) needs to be in hand before a property can be purchased in Tenerife.
Obtaining Bank Accounts In Tenerife
Tenerife estate agents sometimes works collaboratively with a long list of banks in Spain to make sure you can open the bank account you need in Tenerife. There is usually a nominal fee imposed on non-residents who seek to open bank accounts in Tenerife for property purchases, and this covers administration costs. We will also assist in establishing direct payments so that you never have to worry about your bills being unpaid.
The cost of property insurance in Tenerife typically ranges from 150€ to 350€ annually, and some estate agents in Tenerife can provide helpful recommendations and assistance in obtaining proper coverage.
Buying Property In Tenerife
After you select the property you wish to buy in Tenerife and have negotiated all terms with the seller, it will be necessary to pay a 10% deposit. This serves as security for the purchase and an official declaration of intent to buy.
At the time the Escritura is signed and notarised, the remaining 90% will need to be paid.
Should you decide to buy a new construction, the property developer will most likely request a series of payments to be made. Each contractor will have its own set of requirements. Typically speaking, an initial deposit will be necessary within the first month of the contract, and this will likely amount to 10%. The remainder of the purchase price will need to be paid in stage payments, generally 30% when the foundation work begins, 30% once construction work reaches the level of the roof, and the last 30% due when the Escritura, or title deed, is signed.
The solicitor you choose will endeavor to conduct all of the important searches pertaining to the Tenerife property. This is done to verify that the property is in fact owned by the seller, that planning permissions are in place, and that no unpaid debts or encumbrances exist in relation to the property.
After these searches have revealed that no issues exist and the deposit money has been remitted, the title deeds will be signed by seller and buyer in the presence of the Notary.
Tenerife Property Notaria (Notary)
This is an individual who possesses an appointment from the Spanish government to serve as a witness when legal documents are executed. In the context at hand, a Notary will be needed when the title deed is signed. Notaries can witness both buyer and seller’s signatures. The fees paid to the Notary are established by law and are dependent on how much the property costs. These fees are due when the relevant document is being signed.
Original documents are kept by the Notary, who then seeks a formal adjustment to the land registry in Tenerife. Purchasers receive a legally binding copy of the Escritura, and this is signed and sealed by the Notary. It can take some time for this title deed to be fully processed, and this copy functions as official evidence of ownership until that occurs. The copy should be kept secure in the interim.
Taxes And Legal Expenses For Property Purchases In Tenerife
On top of the selling price of the Tenerife property, taxes and other legal costs for a transfer of this type will likely run about 8-10% of the total sale price. These expenses will include:
General Transfer Taxes for Tenerife Property Purchases
The purchaser of the Tenerife property is responsible for paying this amount, which is 6.5% on a resale property. It is necessary to pay this tax within 30 days of the signing of the Escritura. ITP tax will be calculated based on the amount the value of the property has increased since its last sale date. This is a one-time payment that is set in relation to the ratable property value at the time.
For new construction properties, the payable tax is 7% IGIC of the stated value found on the title deed. This tax was previously set at 5%, but was increased to 7% back in 2012.
Stamp Duty For Tenerife Properties
Anytime a new property is purchased, a document registration fee will also be imposed. This comes to 0.75 percent of the purchase price of a new build.`
Notary Fees For Property
These costs are fixed and determined by the purchase price of the property.
Tenerife Property Registration Office Fees
Plus Valia Taxes are calculated and levied by the local Town Hall, and they are related to the land’s surface area, the annual property value increase since its prior sale and other factors.
I.B.I. council rates will also need to be paid on property transfers in Tenerife. This is similar to the rate system in England in years past, and is set based upon the catastral property value, which is set by local authorities.
This tax is paid on an annual basis in Tenerife, and tends to be more affordable than in other areas of Europe.
Property Fees Imposed By Localities
Certain complexes carry their own community charges meant to pay for maintenance, amenities, gardens, security services and other similar expenses. The final cost will depend on how large the community is, but averages tend to be in the 800-1200 per year range. There are complexes that do not pool monies for the provision of services, and these areas may levy just a small charge for lighting of the streets. These can be payable on a monthly or perhaps a quarterly basis.
Residency Status Considerations
In terms of taxation, an individual who lives in Tenerife for at least 182 per calendar year will be classified as a resident. Those who live in Tenerife for fewer than 182 days in Spain, the Canary Islands or Tenerife will be declared non-residents.
Those declared to not be residents of Tenerife but who also own property in the area will be required to pay an annual tax at a rate of 24.75%. This rate was raised from 24% in 2012. If a given property is owned by a married couple, it is required that each spouse file an individual tax return for non-residents.
Calculations of payable rates can be done by taking the Valor Catastral (found on local rates receipts) and multiplying it by 1.1% if the value has been changed in since 1994. This must then be multiplied by 24.75% in order to rach the full amount payable. This is to be paid each and every year for the amount due from the prior calendar year.
It should be noted that the Valor Catastral is typically set at a rate that is far lower than the true market price of the property at issue.
Patrimonial Wealth Taxes
These taxes are annual in nature and need to be paid by those who buy Tenerife property and who also have assets of at least 700,000 Euros. This wealth tax is determined based on personal holdings that include bank account funds as well as real estate. For non-residents, this tax is based just on assets within Spain.
While this tax was at 0% back in 2008, it was reintroduced over a decade later. The tax must be paid annual for the prior year, and the percentage of tax varies between 0.2% and 2.5%, depending on the total wealth level involved. For properties owned together by a husband and wife, there must be separate wealth tax returns filed.
Wealth tax is determined on the highest value of either the Escritura value or the Valor Catastral.
FAQs For Property In Tenerife
What Does A Sales Agreement Involve?
In essence, this is a private agreement entered into by the seller and the purchaser or a property. It needs to include the names of the owners, legal description of the property, specific dates of necessary deposits, designation of the currency to be used, and any penalty terms related to the deal.
What If My Desired Tenerife Property Is Mortgaged?
If a mortgage exists on the property, the buyer’s agent will need to do some work in advance of Escritura signing to notify the mortgage bank that it needs to determine cancellation fees and how much interest and principal remains due from the seller. On the date of transfer, a bank draft must be prepared in order to cover all amounts due to the bank. It is important that after the bank has been fully paid that the buyer ensures that the cancellation of mortgage documentation is properly filed with the Land Registry.
Must We Pay Taxes Upon Selling A Tenerife Property?
Tenerife tax law requires that buyers withhold a total of 3% of the sales price listed on the property deed so that it can be paid to the tax office if the property has been purchased from a non-resident. Spanish tax authorities will enforce this provision, so it is important to remain in full compliance. This works to make certain that there are no private or public debts outstanding to anyone within Spanish territory.
After any existing debts have been paid from this 3%, it is possible for the non-resident seller to instruct his or her fiscal representative to seek a refund of any monies that remain after payment of tax bills and capital gains amounts.
Capital Gains Assessments
On April 5, 2013, the Spanish Government passed its Energy Efficiency Law, otherwise known as Royal Decree 235/2013. As a result, every property in Tenerife that is put up for sale will have to obtain a Certificado de Eficiencia Energetica (CEE). These Energy Performance Certificates must be presented to property purchasers as well as the Notary at the time of transfer.
Energy rating certifications related to this requirement need to be included as part of any real estate marketing or advertising that Tenerife estate agents use to facilitate sales. Again, complete compliance with these rules is essential to making certain that any property sales or purchases processed within Tenerife goes as smoothly as possible and to prevent unnecessary delays.
Purchasing property in Tenerife is something that represents a dream for so many individuals who live abroad. Of course, the process is not always as straightforward as people expect, and that is why it is wise to secure knowledgeable assistance. Not everyone who is interested in purchasing properties in foreign lands understand the subtleties and local requirements, and as such, the expertise of a property professional is not a luxury, but rather a necessity.
The good news is that given the popularity of purchasing properties in Tenerife, numerous professionals who can provide this type of service exist and are able to offer the local knowledge and skills the situation requires. In order to find just the right person to help with a property transfer transaction, it’s a good idea to speak to residents of the local area as well as friends, family or colleagues who have previously made the decision to buy in Tenerife.
Once a few prospective representatives have been identified, it is never a bad idea to conduct some in-person meetings as a way to be sure that there is a good fit between the purchaser’s needs and the representative’s experience and ability level. Because local knowledge is vital to an effective and smooth transaction, this is a factor that needs to play a major role in the selection process.
Having one’s financial affairs fully in order ahead of shopping for Tenerife properties is also a wise move, given the relatively complex nature of tax regulations, particularly those related to the wealth tax. This can help buyers avoid complications down the road that may make owning property abroad a far more expensive proposition than it might otherwise be.
Finding an effective representative to assist with a Tenerife property purchase need not be an overwhelming task. Estate agents, expats and others are almost certain to have high-quality referrals for those ready to make the leap.