Many are fairly well aware of these taxes. Few, however, know or are fully aware of the potentially hefty inheritance tax implications of their purchase, and it is something they need to consider because one way or another they are likely to end up bequeathing a sizeable tax bill to their heirs along with the property. For unlike the UK’s Inheritance Tax (IHT) which is levied on the bequeathed estate, Spain’s equivalent Impuesto sobre las Sucesiones y las Donaciones (ISD) is levied on the heir, based on the amount received, and does not give exemptions to spouses.

Of course, in the vast majority of British Wills, spouses are precisely the ones who are the designated heirs, and the resulting tax bill can come as a complete shock to a bereaved husband or wife used to the UK system of IHT exemption for spousal bequests. In Spain, however, it is blood relationships, not marital, that are given preferential fiscal treatment, and as a rough guide, ISD on a spouse’s inheritance could amount to around 30% of the inherited half, therefore 15% or so of the property’s value. For more distantly related heirs, indeed, this amount can increase greatly.

Recently, the Canarian Autonomous Region has come into line with other parts of Spain, and granted a 99.9% reduction in the tax rate for inheritance between close relatives (parents, children, spouses and family partners). The problem for most expatriate property owners in Tenerife is that to benefit from the tax break the testator must have been fiscally resident in the Canary Islands for at least five years, and the heir for one year, and for both to have been so demonstrably and legally.

Fiscally resident does not just mean living here, but being resident for tax purposes and submitting annual tax returns, proof of which must be provided by means of a certificate from the Hacienda. Moreover, after inheritance, the heir must remain fiscally resident in the Canaries and not sell the property for a further 5 years. As the old saying has it, the only things certain in life are death and taxes, and in the case of ISD for non-residents or any residents who have been beneath the fiscal radar, the two come together.

A further potential problem arises for estates valued in the UK at more than £325,000 because there is currently no dual taxation treaty on inheritance tax between Spain and the UK. Thus for UK domiciled individuals, which is what the vast majority of us are even if fiscally resident in the Canaries, British IHT might be payable in addition to ISD, though inheritance tax paid in Spain can be offset against the British liability, despite the lack of a dual taxation treaty.

There is a range of solutions available for the payment or legal avoidance of ISD/IHT, whether a straight life insurance policy to provide a lump sum to pay the tax, or trust funds, or gifting the property into an English company (though see THIS from belegal.com, which says “using a UK company incorporated purposely is not a real, valid or legitimate vehicle to circumvent the obligation to pay Inheritance Tax in Spain”). In this last respect, Spanish Tax Consultant Rachael Western, who specialises in Inheritance Tax, can not only discuss the issue of English companies, but can also provide a free and impartial illustration of any given ISD/IHT liability: she can be contacted on 0034 699 597 082.

The most important thing is for expatriate property owners to seek advice from a range of suitably experienced professional tax advisers both in the UK and Spain. Your own gestor in Spain and accountant in the UK will also have valuable ideas to contribute. Remember, though, that everyone will almost certainly have an angle, or an interest in getting your business. Make sure that the advice you get comes from as independent a source as possible, and that your final decision is in the best interests of yourselves and your heirs.

The new motorway extension is being built at present to the front of the house, but in the near future considerable landscaping to the whole of the area in front of the entire urbanization will create both a noise barrier and a beautification of the immediate environment. This is therefore a property that would make a lovely family home and an excellent investment. €225,000

The 165m2 house was built in 1996 in rustic style and comes partly furnished and with air-conditioning, heating, phone, ADSL, and satellite TV. It comprises 2 bedrooms, 2 bathrooms, sauna room, kitchen-dining room with wood-burning fireplace, and living room with bar. Externally, there is a garage for 2 cars, and a solarium with a second kitchen and living space with a large terrace leading to the garden. There is also a separate workshop of approx. 60m2 which can be converted into an apartment-annexe. The main entrance to the property has remote-controlled automatic gates.

This property would lend itself perfectly to use as a rural hotel. €749,000

British Consulate in Tenerife

Foreign and Commonwealth Office

Direct Gov – UK Government public services

For less official matters, these are trusted contacts:

TheTenerifeForum Essential forum for all information, questions and conversation about Tenerife.

Auto Leasing Tenerife For long-term hire cars and motoring equipment.

Sunshine Hire Shop For everything you may need but couldn’t pack, from fans to cots and child car seats.

Bargate International UK-based Tenerife specialists for a complete removal service.

Nikki Attree – Digital Artist & Photographer to capture those special Tenerife moments.

Tenerife Information Centre is a website all about Tenerife, packed with information about everything from food to ferries and police to politics, and much more.

For different perspectives on life here, I like the following blogs:

Islandmomma A deliciously whimsical and wonderfully written blog about real life in Tenerife, and with some gorgeous photographs too.

The Beach in Tenerife A family blog about living, learning, working and playing in Tenerife.

Living beneath the volcano A blogger’s blogger with real travel writing crammed with information about the real Tenerife.

Nova’s Haven A brand new blog by a very likeminded friend, a mix of logical and poetic that I find uplifting. Pictures, information and thoughts about everything, including Tenerife.

Churches:

South Tenerife Christian Fellowship Interdenominational Evangelical Church based in Los Cristianos

St Francis Anglican Chaplaincy for Christian fellowship in south Tenerife

If you would like your link included on this page, I would be happy to put it on in return for a reciprocal link – however I will only link to trusted Tenerife-related websites that I feel are of relevance to this website’s readers. Please feel free to contact us with your site details. I check and add all links manually to avoid spam.

As part of your purchase procedure, the Notary will verify that the property you are buying is legally owned and registered to the vendor, that it is free of all costs and charges, and that it comes with vacant possession. S/he will be able to offer an official translation of the documents involved in your completion, if required. If you are unable to sign in person, then you can allocate a representative by specific Power of Attorney to sign at the Notaria on your behalf. What Notaries do not do is confirm the specific legality of the property being transferred. It is possible to transfer, legally, a property that is actually illegal, and so it is still necessary to undertake a full and independent conveyance beforehand.

After completion, the taxes due on the transaction must be filed with the tax authorities, the Escritura submitted to the Land Registry, and the costs disbursed. These costs, known as gastos, are paid by the purchaser in Spain, and up to 10% should be mentally allocated on top of an agreed purchase price: any over-allocation will be refunded at the end of the procedure when the final Escritura is returned a few months later. These gastos include the Notary’s and land registry fees, as well as, primarily, taxes, which will either be 5% or 6.5% depending on whether the property is new or resale. Gastos are normally paid when the Escritura (title deed) is signed at Notary.

Tax. Either 6.5% ITP (Impuesto sobre Transmisiones Patrimoniales, a transfer tax) for resale properties, or 5% IGIC (Impuesto General Indirecto de Canarias, equivalent to VAT) on new properties. For new properties only, a document registration tax (AJD – Impuesto sobre Actos Jurídicos Documentados) equivalent to stamp duty of 0.75% will also be payable.

As of 25 August 2011, a reduction in IGIC on new properties has been announced, provided that the property will be a primary/habitual residence, and that the purchase price is under €150,000. The measure will reduce the tax from 5% to 2.75%, and is intended to assist those who are struggling in the economic crisis, rather than investors, hence the conditions imposed. It will remain in place until 31 December 2012.

Notary Fee. This will vary depending on the value of the property, and should be between 500 and 1000 Euros. The minimum charge is around 300 Euros.

Land Registry. Your new property must be registered in the municipal land registry (Registro de la Propiedad), and the fee should be around half of the Notary fees, except for garages or parking spaces, where the fees will be around the same as the Notary fees.

In addition to these expenses, there is another issue for buyers, and sellers, to consider: plusvalía. Plusvalía is a tax on the increase in assessed value of the land on which a property is situated during a vendor’s period of ownership. Its proper name is Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana. It is calculated both on the surface area of the plot as well as the difference in its Valor Catastral (rateable value) between the point of previous sale and your own purchase. Plusvalía is usually in the region of a few hundred Euros, but can rise to several thousand Euros if a large amount of land is involved or the previous owner has held title for many years. The amount is often not known much in advance of signing, and sometimes not until afterwards, because it is calculated by the municipal authorities, some of which only produce the figure after completion. By law, the vendor is required to pay this tax, though in the Canaries, it has frequently been negotiated so that the purchaser is responsible. Over recent years, however, with an increasingly tough market and a tightening up of all procedures, vendors are much more likely to agree to pay Plusvalía as they are legally required to do.

Once you have bought your property, there will be certain ongoing costs to maintain it legally. These include utilities bills, annual local and national taxes, and community fees if your property is part of a complex.

You should allow for:

Water. This is usually paid directly to the relevant Water Board and is charged according to metered usage. Occasionally, it will be paid via a community who will meter usage internally.

Electricity. This is normally paid directly to the relevant Electricity Company and is also charged according to metered usage. Very occasionally, it too will be paid via a community who will meter usage internally.

Rubbish (Basura). This is usually paid directly to the municipal authority and is charged annually or half-yearly depending on municipality. Occasionally, it will be paid via a community where it will be included in the community charge.

Rates (IBI: Impuesto sobre Bienes Inmuebles). These are usually payable in May/June, or September/November in Adeje. The rate depends on the size, location and age of your property, and is calculated at around 0.45% of Valor Catastral (rateable value), or the chargeable base rate, base liquidable,  if different to the Valor Catastral after a local rates revision.

Community Charge. This is payable by owners of properties which are part of complexes governed by the Law of Horizontal Division, under which a Community must be legally established. At an AGM of owners, the community will approve and adopt a budget which will depend on the various facilities and features of the complex, e.g. lifts, swimming pools, gardens, security, lighting, etc. The budget will be divided amongst the owners according to their quota, which is determined by a recognized formula: in simple terms, it is mainly based upon square metreage. The resulting community charge is paid into a communal fund which is disbursed by a Certified Administrator appointed by the Community who acts in accordance with all instructions arising from decisions made by the owners at Annual or Extraordinary General Meetings.

Income Tax (Impuesto sobre la Renta). Residents and non-residents owning property or investments in Spain are obliged to file annual tax returns. The basic Income Tax rate has been raised from 24% to 24.75% as a result of the new Government’s austerity measures: the new rate is currently for 2012 and 2013, and is applicable to declared and notional rental income. Notional rental income is assessed on non-residents even if they do not let out their properties; it is based on an assumption of a certain level of undeclared rental income, and is deemed to be 1.1% of the property value (or 2% if the Catastral Value has not been updated since 1994), the value being defined as the highest of the price declared on the Escritura, or the Valor Catastral, or the value deemed by the municipal authority if the Escritura price is not accepted.

Wealth Tax. This annual tax was reduced to zero in 2008 by the introduction of a 100% tax deduction, but due to Spain’s economic situation, the deduction has been abolished from 2011. This means that the tax, which we were able to treat as effectively abolished, has now reappeared. It is restored, however, on a temporary basis only, and according to the legislation itself will be in place for 2011 and 2012 only. It is paid yearly in arrears, so 2011’s assessment will be due to be paid in 2012. The tax rate ranges between 0.2% to 2.5%, depending on net wealth over a threshold of (now) €700,000 per taxpayer, so for a couple, this is €1.4 million! For non-residents it is applicable only to Spanish assets, so it will only be payable by the very wealthiest of property owners.

“Thank you very very much for helping us with the purchase of our new apartment in Tenerife! We are really grateful for the time you took to help us. You are a fount of information and we don’t know what we’d have done without your help, especially in sorting out the paperwork we needed. We would wholly recommend your services to anyone who is thinking of moving to Tenerife. Thank you again.” Stephen and Julie Morgans, Los Cristianos.

“Thankyou, thankyou, thankyou, thankyou! We seem to do nothing but say thankyou! What else can we say though. We were worrying ourselves to the point of being ill until you rescued us. Even now, a year after completing our purchase, you are still helping us, and we just had to write this testimonial for you. You are an essential part of the process when it comes to buying a property in Tenerife, and I wish we had known about you before we started. Then you could have done everything for us from the start and we wouldn’t have got into a mess that you had to sort out! We just hope that others find you to begin with, and cannot begin to express our appreciation. So again thankyou, thankyou, thankyou, thankyou!” Margaret and John Jackman, Harrogate.

“I am so relieved to have found out about you! As you know, I was in the process of buying a property and if it hadn’t been for you, I would have been in real difficulties because all was not as I had been led to believe. Enough said. I will never make the same mistake again, and when I come back to Tenerife later this year, I will look again, and will only be looking with your help.” Diane Baker. Nottingham.

“Thanks, Janet, for helping me with my Will recently. I feel so much more secure now that it’s all sorted out. I’ve got a few friends who need to do theirs, and I’ll be recommending them to contact you. All the best, and thanks again.” Angela Chisolm. Cork.

“This is just to say a huge thankyou for helping me recently. I cannot recomend you too highly to anyone else in my situation. I didn’t have a clue where to start, but now I have everything sorted out thanks to your kindness and honesty. I was particularly impressed with your efficency and the constant stream of information you supplied, and felt I was kept fully up to date all the time. Not once did you seem put out by my dithering, and I never once felt under any pressure. This was what I had been most concerned about, having heard such tales of Tenerife, but when it came to it, there was not a moments concern about anything.” David Dicks, Puerto Colon.

“Hi Janet, and thanks for helping me sort out my Registro certificate. I couldn’t face the idea of standing in a queue for hours on end, and would not have had a clue about the forms! Thanks too for explaining everything about the residency system, and all the changes that have taken place. It was very confusing because everyone was saying something different, it’s all clear to me now, though, and I’m all legal now!” Nigel Harris, Chayofa.

“Janet accompanied me when I took my car for the ITV. I’m so pleased she was there as I would have struggled with the procedures and terminology. It was such a relief to have someone help me. Friendly and efficient. What more could you ask for.” David Rochester, Callao Salvaje

You will need a NIE (Numero de Identidad de Extranjeros) to do almost anything here because Spain operates an Identity Card system, and NIEs are the equivalent for foreigners conducting official procedures in the country. Although the number itself is permanent, the certificate is now of 3 month validity only. This is because anyone who is coming to live in Tenerife on a permanent basis must register as a resident foreigner after 3 months, and obtain a Registration Certificate, known as Certificado de Registro. This is simply a matter of registering resident foreigners, and does not have tax or financial implications. Those who do not already have a NIE when they apply for a Certificado de Registro will be allocated one at the same time.

For those who do not intend to reside in Spain, the NIE will be sufficient, but non-residents will also need a certificate for their banks confirming their non-resident status. This document is known as the Certificado No-Residente, and is essentially the non-resident equivalent of the Certificado de Registro. Some banks will take care of this for their clients, and it is essential to check whether this is something that is being handled within your particular bank or that needs to be arranged independently because embargoes can be placed on accounts where a certificate is not in place. This document will need to be replaced every 2-3 years.

If you own property here, you should seriously consider making a Spanish Will. Spain views inheritance in a different light to British Law, and without a valid Will in place,  in the worst case scenario, your assets could end up being disposed of according to Spanish Law and might even mean that your spouse cannot inherit all your property. To make a Spanish Will, you will also need a valid UK Will in place, and the terms of the two Wills must match, though your Spanish Will will only be concerned with your Spanish assets.  A foreigner’s Spanish Will essentially acts as a pre-legalized mechanism to ensure that your UK Will’s clauses concerning your Spanish assets are executed according to UK Law, and within weeks rather than months or even years, because there will be no requirement to wait for probate to be granted in Spain. There will also be a significant saving in legal fees because the speedier mechanism will already be in place.

I live with my husband in a 200-year-old Canarian cottage in a mountain village a kilometer high overlooking the west coast. Our garden is packed with geraniums, roses, and fruit trees … and lizards who are now so used to us that they have to be shuffled out of the way as they come to us for titbits, whether cheese, fruit, or particularly eggs! Here are a couple of photos: the first is the view into the barranco and uphill to Teide’s crater from the edge of our garden just as the sun is about to come over the crater edge, and the other is a rather blurred zoomed picture of “sooty”, a lizard who somehow managed to fall down the chimney pipe to our woodburning stove, which resulted in a hasty dismantling … and the escape of a very cross and sooty lizard who’d lost a piece off the end of his tail in his adventure!

We are now in our eighth year here, and I have spent my time indulging a longstanding interest in property, investigating everything from home design to construction, sales techniques, and particularly, the legal aspects of the Canarian market, as well, indeed, as most aspects of the expatriate experience in Tenerife. If I see myself as anything, it is as an advocate for anyone thinking of moving here, or actually living here and struggling with day to day bureaucracy and legalities.

My goal is to enable people to be stress free and to help them fulfill their dream without it turning into a nightmare, something that can unfortunately be an all-too-familiar story. I hope that this site will be helpful to anyone looking for up-to-date and relevant information about what is happening in Tenerife, as well as a straightforward guide to the legalities and bureaucracy involved in being a resident or property owner here.

Below on this page are the five latest of regularly-updated current news and events posts from the local media; for earlier items, just click on the main news link in the right hand column. Please do express opinions or ask questions: just click on individual headlines to find the comments box. There is also a Tenerife Sur current weather box in the right hand column which links to Weather Underground for more detailed forecasts. For other more specific information, simply browse the links at the top of this page, or contact me by e-mail or phone one of the numbers in the box at the end of the right hand column (the 922 number is a landline, the 678 one is a mobile).

COPYRIGHT: I have written all the text on this website. Whilst the news and facts themselves are not subject to copyright law, my opinions and views, as well as my wording and translations, are, and I claim copyright. Readers are welcome to use text for other websites as long as they name this site.