Buyers Guide to Tenerife
"Purchasing a
property is a daunting task even when
you do so in a familiar enviroment, so
when you come to purchase in a foreign
country the doubts and worries are ten
fold. We have created a simple guide
to the main FAQ´s that you would need
answering when entering into a
property purchase"
THE CONTRACT
Once you have decided on a property, a
contract will have to be drafted and
you need to make provisions for the
deposit. The standard deposit is 10%
of the purchase price. The deposit is
payable upon signing a Purchase/sale
Contract or an Option Contract
(Contrato de Compraventa o Opción de
Compra), which will include a
completion date and transaction
conditions which usually contains an
assurance by the vendors that the
property is sold free of charges,
tenants and mortgages. We strongly
recommend that independent legal
advice is sought with the drafting of
the Option Contract or Purchase/sale
contract.
Once both parties have signed this
contract and the deposit has been
paid, you have secured the property.
This is a binding contract for both
sides with penalties for breaking it
or for failing to honour the terms of
the contract.
PAYMENT
AND SIGNING OF DEEDS:
The next stage is to complete the
purchase at the Notary’s office.
Usually, within a month or so, you
will be ready to make the final checks
before signing the Title Deed
(Escritura Pública de Compraventa) in
the presence of a Spanish Notary
(Notario) who certifies that the
contract is officially made. The
notary does not certify that all
statements are true, only that the
parties have sworn to them. There you
will be required to pay the balance of
the purchase money, taxes and Notary’s
fees.
NOTARY
CHARGES:
These are collected by the Notary for
preparing the deed and presiding of
its signing. His fees are fixed by law
and are based according to the value
of the property.
Please note that all professional fees
including the notary’s and land
registry charges are subject to 16%
VAT.
PROPERTY
REGISTRATION FEES:
Registration fees are charged by the
Land Registry Office to inscribe the
new deed into your name. These are
based on the official registered value
of the property. The length and
complexity of the deed and other
factors are also considered. The fees
do not exceed 1% of the registered
value. It is not advisable to try and
do this yourself unless you are
experienced and speak Spanish
fluently.
TAXES:
(PROPERTY TRANSFER TAX OR IGIC (VAT)
The property transfer tax is levied on
resale properties. The General rate
for this tax is 6% but in some
regions, such as the Balearic Islands,
Cataluña and Valencia, etc. the rate
is established at 7%. This should be
verified beforehand.
If you purchase a newly built property
from a developer you will pay a
different tax called “I.V.A.” (VAT)
which is charged at 7% of the purchase
price plus 0,5% stamp duty.
LOCAL
MUNICIPAL TAX (PLUSVALÍA):
This tax is based on an officially
assessed increase in the value of the
land since the last time the property
was sold . This can be quite small if
purchasing an apartment, but expensive
on a villa with a large plot, which
has not changed hands for years. Find
out the exact amount from the Town
Hall. Do not confuse this tax with the
vendor’s capital gains tax on his
profit on the sale.
In
accordance with Spanish law, the
purchaser is responsible for transfer
tax or (I.V.A. + stamp duty when
buying from a developer), plus
Registration Fees and Notary’s Fees.
OUTSTANDING DEBTS:
If there are any debts, outstanding
mortgages, unpaid Community fees etc,
then you should make sure that the
debts are paid by the vendor before
paying him the purchase price and
signing the Deed of Purchase/sale, or
you can deduct the amounts owed by the
vendor from the purchase price to be
paid and settle the debts on his
behalf. This should be agreed between
the parties.
WITHHOLDING TAX:
If you buy a property from a
non-resident person or a company, you
must withhold a 3% of the value
declared on the deed and pay that
amount to the Spanish Treasury (Tesoro
Público). The Spanish Treasury makes
it the purchaser’s responsibility that
this amount (3% retention of the
purchase price) is paid to the Tax
Authority on account of any Capital
Gains tax generated by the vendor with
the sale.
Supplied Courtesy of AMLA Spain
E-mail: iinfo@tenerifepropertyagency.net
