Recommendations for buying a Property in Tenerife from local Property Purchase expert Lawyers, learn about taxes and possible issues.
Buying a Property in Tenerife sounds promising but no doubt you want to do it right, no surprises; whether you are looking for a property in the coastal areas or if you want to enjoy the diversity of large cities (Santa Cruz de Tenerife), the steps to follow are not always intuitive.
In addition, it is necessary to be clear about what taxes and expenses have to be dealt with. All this and much more is explained below.
Tips for buying a property in Tenerife
We would recommend that you:
- Visit the property personally before paying any amount, that is, check first-hand the condition of the property, the surroundings, the transport routes that connect to the area, etc.
Get familiar to the environment and research on clear maps: remember yo are buying a Property in Tenerife, which on the field means you could feel on paradise or exploring Mars.
- Know who owns the property. Make sure that you check any requirements, permits and legal status of the property from the area City planning office.
Check for zoning, flood zone maps, architectural requirements and more. There are limitations on building size and any renovations might not be permitted.
Many problems occur for these reasons.
- Once acquired, register the property in the Land Registry, to demonstrate that you have absolute rights on the property that has been acquired in Tenerife.
- If a deposit agreement is made prior to the signing at the Notary, look for an expert to verify the content of the contract and its effects.
- Hire a Solicitor to review any documents and include any clauses in the contract that will give you a way out in the event something goes wrong.
- DO NOT sign a contract without having your Solicitor review the document.
- DO NOT hire a Solicitor that was referred to you by the estate agent, or who works directly with the Real Estate Agency.
We strongly suggest that you get an independent Lawyer.
- DO NOT sign any exclusive agreement with an estate agent.
To avoid all these uncertainties, serious errors and delays, we recommend that you delegate all tasks to a lawyer experienced in dealing with conveyances in Tenerife.
How to buy a property in Tenerife as a foreigner
The only essential requirement to buy a property in Tenerife is to obtain the NIE (Foreigner Identification Number).
It is a personal and unique number, essential to carry out any transaction in the island, from opening a business to buying a property.
When a non-resident obtain the NIE, they can start the process for the purchase of the property.
It is not mandatory to open a bank account in Tenerife but it will facilitate the payment of taxes and expenses.
The purchase of the property is carried-out at a Notary and is registered in a public registry, that is, the Land Registry.
You should bear in mind, that before signing the deeds at the Notary, it is very common to sign a private contract of sale called “contrato de arras” (deposit contract).
In this deposit contract a part of the price is already paid, on account of the final price which is paid when the property is transferred at the notary.
What taxes and expenses must be paid when purchasing a property in Tenerife?
The purchase of a property is subject to various taxes, which increase the cost of the property substantially. Among them are:
- The Value Added Tax (IGIC), in the case of new propertys or first transmission of a property. Tax rate of 7 %.
- The Property Transfer Tax (ITP), in the case of second-hand residences or second transmission. The tax rate is 6.5 %. It must be paid if VAT (IGIC) is not applied in the transmission.
- Tax on Documented Legal Acts (AJD). It must be paid if the property is purchased and VAT (IGIC) is applied, and if it is purchased through a mortgage.
In addition, there are other expenses that must be taken into account:
- Public deed at the notary.
- Registration of the deed in the Land Registry.
- In the event that it is necessary to request a mortgage, it is also necessary to include the appraisal and the notary, the mortgage taxes and the registration of the deed in the Land Registry.
During the year you will also have to deal with other taxes, such as the Land Tax (IBI), the Wealth Tax – if applicable -, the Personal Income Tax (IRPF) or, if you do not live in Spanish territory permanently, the Non-Resident Income Tax. We can assist with ensuring compliance with all taxes relating to home-ownership in Tenerife.