Buying property in Tenerife will unfortunately not go without paying taxes. Since 2018 you have to be registered in advance with the Spanish tax authorities so that you can comply with the tax obligations in Spain. Unfortunately, we all know that we have to pay taxes, in Tenerife this is no different. We will go with you to the relevant services and arrange this completely so that you only have to put your signature on the relevant documents.
Buying property in Tenerife is not possible without a financial contribution. So, the next step is to open a bank account at a Spanish bank. This is required in order to transfer, among other things, the funds you need to buy your property. But more specifically also to have your current accounts directly debited as soon as you become the owner, such as water, electricity, the community of owners and your taxes.
Buying property in Tenerife is also perfectly possible without having your own Spanish bank account. You can transfer the funds directly to the notary, but this will cost around 450€. And a solution for the payment of your utilities needs to be found if you would choose not to open a bank account at all. (We can provide you with this, should you not wish to have your own bankaccount in Tenerife)
Attention! Since the beginning of 2018, when opening an account for a foreigner, the banks require the following: your last tax return from your country of residence (in English, German, French or Spanish) This against money laundering.
You must also be in possession of proof of your work/income. If you are self-employed, a proof of self employment (an extract from the HMRC for the UK) is sufficient; if you are an employee, your last payslip will suffice. You will also have to prove where the funds come from for your imminent purchase. Mortgage, loans, inheritance, gifts, savings, … Contact us for more information about this!
As soon as you have made your choice regarding the property you wish to purchase, the estate agent or we will draw up a promise of purchase and sale which has to be signed by both the buyer and the seller and which gives legality to the imminent sale. Buying real estate in Tenerife is generally done by signing a promise of sale before going to the notary, even though this is not a legal obligation. It is therefore customary for you, the buyer, to pay a deposit of 10% of the agreed selling price at the time of signing this document. You will lose this deposit if you would renounce to buy the property.
This deposit payment remains in the account of the intermediary (broker, lawyer, third party, …) until the signing of the deed or, if applicable, paid to the selling party.
Please contact us before you sign a promise of sale with a real estate agent, so that we can read it for you and look after your interests! A signed document is legally valid and you need to make sure that you understand what you are signing and buying!
Buying property in Tenerife is slightly more “dangerous” than in other countries. In Spain and the Canary Islands, you can take over real estate debts, which are not automatically cleared upon the sale of the property. Dramatic stories that you sometimes hear in the news are usually based on the fact that this has not been checked and that the buyer has not been assisted by an independent consultant like ourselves. Or even worse, that there has been malicious intent, although fortunately this does not happen very often.
Buying property in Tenerife with a running mortgage is possible, you can even take over the mortgage, but this is not recommended. If there is still a mortgage on the property, it must be settled after the signing of the deed, unless you would take over this debt, which is possible in Spain and in the Canary Islands. The settlement of a current loan can take some time, as the bank has to be paid back, after which a deed has to be signed again to remove the mortgage from the Register.
It should also be verified that the seller has paid all other current accounts, i.e. water, electricity, community (if applicable), basura (rubbish collection) and IBI (property tax). As a buyer, you need to be sure that you are buying completely free of debts, or that the debts are deducted from the price you pay to the seller so that we can settle them for you with the relevant services.
A capital gains tax must be paid by the seller on the sale of his property, but it is the legal obligation of the buyer to actually pay this to the authorities if the seller is a non-resident. So it is important to know in advance how much this amounts to as this sum is deducted from the price. The capital gains tax is therefor not paid at the notary’s office but later via the municipality. You withhold this amount from the purchase price and Seb Leeson & Co will pay it for you at the competent government agencies.
If the seller is a foreigner and is not a tax resident, 3% must be deducted from the selling price. Again, the obligation to pay this to the government lies with the buyer. This is also not settled with the notary but by Seb Leeson & Co at the competent services.