Spain Property Purchase Tax Rises

… but Tenerife stays low

Spain’s government is to raise the VAT rate on new properties purchased from 7% to 8% in 2010.  The cost of purchasing a home in Tenerife is to remain the same.

The average home will now cost over 2,000 Euros more to buy in mainland Spain.  The VAT on a 200,000 Euro home in the Costas or on other Spanish islands, such as Ibiza and Majorca will now cost buyers 16,000 Euros. 

Transaction taxes are not funded by mortgages, so buyers will have to find this extra amount from their capital. 

The Canary Islands, including the popular holiday destination of Tenerife, will not be affected by these tax hikes.  The Canaries are a European special tax zone in which VAT is at the lowest level in the EU, at just 5%.  The costs of purchasing property in Tenerife remain substantially lower than the elswehere in Spain.

The rise in VAT in Spain will make property in Tenerife and the Canary Islands more attractive compared with the mainland.  The area is very popular with foreign property buyers because the guaranteed 12 months of sun allows owners to rent their properties to holidaymakers all year round.