Q&A on owning property in Tenerife
People have all sorts of questions about owning property in Tenerife, whether about going to the notary, the costs involved in a purchase, or sale, or about community life. Please do use this page to ask any such questions.
As I’ve said on other Q&A pages, please be careful to avoid giving too much personal or private information away. This is an open site, and a question posed without personal details will still get the necessary answers without making you vulnerable.
Hi, some years ago I purchased an apartment in the Canaries. 3 years and 10 months later I received a complementaria notice from the Oficina Liquidadora , that their Tasacion value was more then twice, so they had taxed me 7% on the difference, coming to some 1.400E, plus 3 years and 10 months of interest some 350E. I complained about the valuation and the time they had taken to ask for their tax, but they replied that the law allows them up to 4 years to notify and charge you interest on the delay. Now it all seem a bit abusive: why should I pay taxes on a price I did not pay or interests on a delay in payment caused by them?
To note in mainland Spain these complementaria notices are served normally withing 2-3 months, so there is a further unjustified abuse on the abuse in the Canaries. I have now bought another property in the Canaries and asked to be told immediataly what was the tax value so I could pay it , avoiding the almost 4 year interest, but the lady said that such taxation had to be valuated and passed me a form to ask for it. When I asked how long it would take them to do the valuation, she replied well… years! as they have a back log of them….
So few days later I went back with a letter asking them for the taxation value to pay the tax immediately, but if they could not supply it, they could not charge me interests on the delay. The lady was visibly irritated, went to the back to talk to colleagues, and came back saying they would not take or stamp this letter of mine. I therefore sent the letter via registered mail the next day. Will this letter be of any use? what else can be done to contrast this abuse?
This frequently happens here when prices are far below what would be expected, and as you say, demands for a “top-up” sales tax can arrive up to four years later. Whether that is because of overload, incompetence or a desire to charge interest on top of the tax, who knows? The problem has arisen, though, because of abuse in the past on the part of those directly involved with property transactions. “Black money” has traditionally been a standard part of such transactions and everyone, even notaries, knew it was happening. The tax authorities’ only recourse was to take an independent view of the transaction and “assess to tax” any property for which they did not believe the price noted in the escritura.
The problem is becoming quite serious now that prices are falling genuinely here, with people paying sometimes just 50% of a “tax value”. What will happen, for example, to all those properties bought as repossessions from the banks? These are sometimes at knockdown prices, abusive in several other senses, of course, but there could well be a serious tax bill waiting up to four years down the line for anyone who buys property far below what the tax office will accept as the tax value.
As to what can be done about it – nothing as far as I know. When has anyone known anything be achieved against a national tax authority which has the power to “assess to tax”. It happens in the UK too, to my certain knowledge (though not necessarily on property, but the principle is true) and is presumably true throughout Europe. I guess if you want to get anywhere you’ll need to get a lawyer to argue at that level. Better to declare a true, or even a false high price, on the escritura.
For what it’s worth, you are talking about a tax value achieved after purchase. If anyone is in any doubt about whether the tax office will accept the escritura price, then a valuation can be acquired BEFORE signing. It only takes a couple of months to get, and once it is given, the Hacienda has to stick with it.
If I’m not be allowed to let a residential property on Tenerife for holiday purposes, either commercially or to family & friends for a nominal fee, why is a notional rental income tax payable on such properties? Or does income tax only apply to letting touristic properties? Also, is their a list of residential property areas to assist buyers? Thanks
Notional income tax applies to all properties owned by non-residents in Tenerife, whether residential or touristic. With residential properties, it is assumed that since the owner is not permanently resident, s/he lets out the property while not using it … lets it out legitimately, that is. To clarify, under urban letting legislation that can be anything from 1 day to a year; it is just the tourism department that is saying they will deem anything under 3 months to be commercial letting. Even those owners who declare such letting income properly in the annual tax return they’re supposed to submit, it is assumed that there is some that is not declared.
There’s not a list (that I’m aware of) of residential property, but have a look at THIS link and/or THIS one (I’ve tried setting them to English for you): these are touristically licensed properties and the sites are official ones.To a very large extent they’re exhaustive, so it will be a very good bet that if you can’t find a complex in either of those sites, it’s residential.
Hi Janet, If I want to get a valuation of an apartment I am considering buying , to submit to the tax people BEFORE I sign anything, (thus avoiding the scenario which happened to Marc) who gives me this valuation? and is this something my solicitor would do as part of his searches etc.
Thanks Steve.
It’s not an automatic part of a search, no, but it’s something I or any conveyancer, including an abogado, would do if specifically requested. Do bear in mind that there is an unpredictable time involved here … anything from a couple of weeks to two months. You don’t submit it “to” the tax people, you get it “from” the tax people … and keep it as a record of the fiscal value of the property so that the tax is known beforehand, and cannot be surcharged later.
Hi Janet, I am trying to learn as much as I can before I buy the property we have in mind, which is where your site is very helpfull, to obtain this tasacion value is this something I can do myself? if so how, or should I leave this to a conveyancer/abogado?
Thanks Steve.
You can do it yourself, you just need to go to the Hacienda office (the one in the south is in the Zentral Centre), but if someone asked me to include this in a conveyance, it would be included at no extra cost, so I would expect anyone you appoint to offer the same.
Just a comment – not all sales are assessed by Hacienda. I received one of these demands recently (2009 purchase) but, even with interest, it only added less than 1% to the total purchase price on what was a very good deal at the time. An apartment I bought in 2008 in same complex for an even better price has not been questioned.
Hi janet
I have a question regarding how hipotecas are registered
Is it registered against the Referencia Catastral of the property
A mortgage shows up as a mortgage charge in the land registry.
if i sell my place to a a private buyer. who gets the depoist. also talking to a property agent today and they said they would help us with the sale and charge one half percent to make sure the tranaction goes smooth. what would your advice be and has anyone done a private deal without a agent.
Hi Anna, yes, I’ve helped many people in private deals without agents, and 0.5% seems a very broad brush to apply: it’s fine, perhaps, on a property selling for €100,000, amounting to a not unreasonable €500, but on a property selling for €500,000? That’s 2,500 Euros for the same work!
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In any case, the costs for helping a seller should be less than those paid by a buyer, who will have after sales work to be done as well as pre-signing checks to be carried out. If you would like to discuss this privately, please send me an email.
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As for a deposit, they are increasingly rare these days, particularly if both sides can proceed straight to notary.
Since we bought our apartment we have paid the bank about €50 a month to cover the mortgage these polices in my mind are poor value for money as they only cover a small part off the outstanding mortgage and not the full amount!.
Today i contacted my Abogados to find out if i could cancel this policy here is reply please note i have other insurance polices that will pay off the outstanding mortgage so im not recommeding that you take this course off action this for information only. David
It is compulsory to have a house insurance when you borrow money from a Local bank but not a life insurance.
Although it is very convenient to have a life insurance to cover the mortgage it is not compulsory unless the bank asked you to contract a life insurance to keep the loan’s monthly payments low.
First you need to find out how and when you can inform the company that you do not wish to continue with the policy: this information should be in the policy papers.
Another option might be to include in your other policy a clause stating that if anything happens to you the bank will get paid whaever monies are still owed re. the mortgage.
Hi David, and that’s correct. It is indeed compulsory to have house insurance with a mortgage, but not life insurance. Many companies refuse to give you the information, but unless it is written into your mortgage escritura that you must have life assurance, you do not.
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Any policy you have for life insurance is likely to be very evasive about how to cancel. Most, though, have a clause somewhere allowing that the policy will lapse “if you cease payments”.
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Anyone with life insurance on a mortgage should also note that in the event that this is paid, it will come off the mortgage amount, not be paid as a cash lump to the insured.
Yes your correct as usual you dont see any off the money but even after this is paid out you will still owe a substantal amount in my case just short off half the outstanding amount so as a insurance product useless. For the same amount each month i have over 3times the cover hence the reason i will cancel this policy everyone should have insurance just in case the unthinkable happens. David
Janet if you sell your apartment. does the money have to go into the spainish bank first or can they take your taxs at the notary and tranfer the rest to your bank in england on the day of the signing as i am sure people worry about leaving money in the bank here
Hi Anna, the money can be transferred electronically to any bank anywhere, or paid as a Spanish bank draft, or paid with a bank draft in Sterling drawn on a bank elsewhere outside Spain. It does not have to go into a Spanish bank. Any notarial costs have to be deducted before the seller gets his or her money, but the way that money is paid to the seller at that point is purely a matter of negotiation between seller and buyer.
“”Anyone with life insurance on a mortgage should also note that in the even that this is paid, it will come off the mortgage amount, not be paid as a cash lump to the insured.”"
This is very true has I found to my cost after spending over 3000E to obtain notarised documents required by the spanish bank they then refused to hand over the cash and instrad paid the sum due off my mortgage amount, leaving me with a bill for the inheritance tax which I thought the insurance would cover.
There is more information on inheritance tax under the same tab above, second link “Capital Gains and Inheritance Taxes” … direct link HERE. It is a major issue that I call “the great unmentionable”.
Janet the agent selling our house rang to say we need a energy cert before they could show our house to clients. I know you wrote about this. What I want to know who to use to do this job as the agent said they have there own people. I do not want to be ripped off as I am sure the agents will charge extra. Would it be cheaper to get a independent person and could you recommend were I would find this
Yes, I wrote about it HERE, and I’m grateful for the jog, Ann, because I’ve now found the information, which is now available. I’ve just updated the main post with this, but it’s worth repeating here:
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Anyone wishing to organize one of these certificates, or to confirm that someone else is legally able to issue them, now has an official regional contact point. THIS is the national list from the Government, and the details for the Canaries specifically are:
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Consejería de Empleo, Industria y Comercio. Dirección General de Industria y Energía
C/ León y Castillo, 200; Edificio Servicios Múltiples III , Planta 4ª; 35071 Las Palmas de Gran Canaria
Tel: 928-899-400 ; http://www.gobcan.es
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THIS appears to be the full list of those qualified to issue these certificates in the province of Santa Cruz de Tenerife.
Hi Janet,
I have just arrived at my apartment & have been told that our Residental complex is going to get a Tourist licence from the local Mayor. As this Mayor has a reputation of being as “bent as a nine bob note” and as the crow flies not very far from where you live, you more than proberly know who I am talking about.
The question is can a local Mayor issue one of these licences or should it come direct from the Central Govt.
not the most straightforward question, M, because it depends what you mean by “tourist licence”. The land has to be tourist-designated (that’s the Ayuntamiento and the Mayor), and the property has to be registered at an island level (that’s the Cabildo), and then it has to be in line with legislation (that’s the Government) …
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It sounds to me, if the local authority is involved, that your “licence” is something to do with the designation of the plot.
Surely M , you must have an EGM where owners have to vote 100% in favour of changing from residential to touristic before this can proceed ?
Therefore you can vote against this change ?
Janet, I have seen the land purchase agreement & it clearly states the construction of the complex is for residental use, although it is 51% timeshare & 49% outright owners
John I am afraid as Janet has said it has to be Tourist land our complex is totally Touristic, no residents in fact we want to be Touristic but are not allowed
M, the question where the Ayuntamiento comes into it is not involved with the council … which is why the mayor cannot grant the complex itself a tourist licence. The Ayuntamiento is concerned with the designation of the plot of land itself: if that were residential then a tourist licence wouldn’t avail you anything anyway.
Janet,
We thought the Ayuntamiento or Council were the same thing, are you saying that the Ayuntamiento or Council must recategorise the plot of land first. Then we can apply for a Tourist licence. The only thing the Mayor can do is recomend that the land is recategorised but he has no power to do so himself
Yes, what I’m saying, as I’ve said before, is that you cannot apply for a touristic licence at all until the land is properly classified – and that’s a matter for the ayuntamiento (same as “local council” – to be distinguished from Cabildo, which is the island governing authority, often translated as “council” … ).
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Whether the mayor has the “power” to force this personally is a difficult point: it has to be done properly or it will come back to bite someone’s behind. There are plenty of cases where a “licence” has been granted by a mayor only later to be found illegal …..
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The land classification appears in the PGO (official municipal land designation map), and until that is formally amended, no licence is worth the paper it’s written on …
Hi Janet,
We just bought a residential appartment which we want to let to resident people.
And now we want to do a calculation of de bruto rent and netto rent.
Do you have an overview of all the taxes we may expect to own and let the property?
We heard about an Income Tax, Wealth tax, IBI, … and they are all not clear to me.
The income tax is 24,75%, but on which base (deductables)?
Hi Eddy, could you have a look HERE, please, and see if it answers your question. Please do come back with any specific questions afterwards.