You are here : Home page > Tenerife Purchasers Guide
Tenerife Purchasers Guide
Purchasing Procedures
Usually a 10% deposit is requested on a resale property and 10 to 25% when buying directly from the builder on a new property.
Contracts are immediately drawn up and the document will include the completion date and forms of payment.
The agency or solicitor has the responsibility to gather any pending receipts and to ensure that these are cleared before the sale goes through so that at the time of signing there are no debts on the property.
Nota Simple (confirmation of ownership and any mortgages or embargos).
I.B.I (Local council rates).
Electricity & Water receipts up to date.
Community receipt up-to-date, signed and approved by the President of the Community itself.
Copy of the Title deed (Escritura).
If the original of these documents is not presented, the deed can not be signed by the Notary on the day of completion. However, should the buyer be aware that certain receipts are lacking and this is clearly stated, the procedure would go ahead.
NB: Should there be a mortgage on the property, it can be cancelled and registered on the day of the signing at the Notary.
Taxes & Legal Expenses
Are made up as follows (to be added to the Sale price)
Approximately 10% (of the Sale price).
6% (Impuesto sobre Tramisiones Patrimoniales y Actos Juridicos Documentados - Mod. 600) of the new declared value on the deeds (Equivalent of VAT) when buying a resale property.
5% if new and 0.5% of Mod.600.
Notary Fees.
Property Registration Office.
Plus Valia (Added value).
Non-residents can get up to 60% of the valuation. We can help you with this process.
a) Costs involved:
Valuation will cost approximately € 240
1% mortgage opening commission.
Insurance will vary from € 120 to € 240 per year.
Notary & Registration of the mortgage.
b) Advantages:
Provided you submit the requested financial information, the mortgage can be effective within 10 to 15 working days.
The financial information requested is basic.
It does not reflect your country of origin.
Should you rent the property, the same account can be used as a debit/credit account.
Extremely low interest rates: 4.0% Variable, 5.0% Fixed.
Tax deductible.
c) Disadvantages:
Local banks (whether it be an international entity or not) will finance a certain percentage of the valuation which will not necessarily be the real selling price. Depending on the valuation it is advisable to make a small comparative study with what your own bank may offer.
Frequently Asked Questions:
What is a sales agreement?
A private document signed between the buyer and seller. It must reflect true ownership, legal definition of the property the exact form of payment (Bankers draft, cash...) currency of the transaction (Euros, Pounds, Dollars etc.) a fixed rate, completion dates and penalty clauses. In general terms, if the seller withdraws, he is liable to pay double the amount of the deposit previously paid.
Fiscal advantages in the Canary Islands for private or professional investments.
The Canary Islands have been categorized by the European Central Government as the Z.E.C (Zona Especial Canarias), this implies low taxation (only 5% I.G.I.C - equivalent of VAT), 18% on capital gains. Buying in the name of a company will exempt you from said tax. The R.I.C (Reservas de Inversiones Canarias), stipulates that companies will be taxed at just 10% of their profit if they allocate 90% within the Canarian territory. The government allows a period of three years to invest those benefits. As such, we have been witnessing a spectacular economical growth during recent years, and an increasing number of Multinational Offshore Companies on the islands.
And if there is a mortgage on the property?
Most people panic when told there is still a mortgage on the property they wish to buy. Before the signing date at the notary, your agent will instruct the Bank in question to prepare the cancellation costs, the remaining amount and any interest due pertaining to the seller. On the day of the signing you will be asked to prepare a banker's draft for the amount due payable to the bank, which will cover the mortgage etc, the remainder going to the seller. It is then the banks responsibility to register the cancellation of the mortgage.
Is it easy for a non-Resident to obtain a mortgage?
Yes. Provided basic financial information can be submitted to the Bank, obtaining a mortgage in the Canary Islands is much easier than in most European countries. The maximum amount the bank will grant you is 60% of the valuation of the desired property. An agent will generally handle the process for you from beginning to end . Builders will often offer a pre-arranged mortgage if you purchase a property still in the construction phase.
What must a non-Resident do in order to purchase in the Canary Islands?
An N.I.E (Number of Identification for Foreigners) is required, in the Canary Islands, which is a fiscal number or something similar to your ID. A non-Resident bank account must also be opened. Again most agents will handle all these administrative procedure for you.
Is tax payable when selling a property in the Canary Islands?
YES
a) There will be a 5% retention (on the new declared value) imposed by the Public Treasurer (Ministry of Economy). This procedure is carried out in order to ensure that no public or private debts are pending within the Spanish territory. Provided your accounts are up to date, the most part will be refunded after 5 or 6 months, through your fiscal representative.
b) Capital Gains - these need to be discussed with your Financial representative.
Mortgages
We can arrange mortgages with a number of Spain’s major banking organizations. The table below has been designed to give you a guideline as to the cost per month of a mortgage. The figure quoted is per € 5,000 borrowed.
Mortgages are available for both residents and non-residents of the Canary Islands. In the case of a resident up to 80% of valuation may be granted by a bank. In the case of a Non-resident up to 60% may be granted. We should point out that banks here do not use the same criteria for valuation as do other countries therefore, the valuation figure will not necessarily be a reflection of the actual purchase price.
The bank will expect you to provide proof of both personal income and monthly expenses. This allows them to check that future repayments can be made. Proof is usually submitted in the form of tax returns or business accounts spanning the last 3 years up until today.
If you wish to use a mortgage as collateral in order to purchase a business, please remember that a bank will not loan any figure against a Leasehold purchase. However, on a Freehold purchase normally up to 50% of the bank valuation of the building can be loaned.
Should you choose to follow this last alternative, your Spanish property will be held as security against the loan, and a charge will be registered in the Property Registry.
Search properties for sale in tenerife