Fees and taxes
There are taxes and two fees payable on all transfers of Tenerife properties. The Notary is entitled to a fee for preparing the Escritura, and there is a further fee for registering the property in the new owner’s name. There is a document tax of 0.75% plus a local tax (I.G.I.C.) which is at present 5% of the official value if you are purchasing a new property from a developer, or a 6.5% transfer tax if you are purchasing a resale property from a private owner.
There is also a tax on the increased value of the land known as Plus Valia, which is levied at various rates on the annual increase in value since the previous sale. Plus Valia tax is and always has been the responsibility of the vendor, although custom in the Canary Islands has been that this tax is left for the purchaser to pay because in the past it has often been many months, or even years before the amount of tax due could be advised by the tax office.
The actual amount of tax payable is not determined as a percentage of the property value or the declared purchase price, but is calculated on the increase value of the land that the property stands on; from the time the previous owner purchased it until the time he sells it. Consequently, if the previous owner only bought the property one year ago, the tax would have been paid at that time and the tax due on its sale now would be very little. In your case it would appear that the vendor owned the property for a substantial amount of years.
It is now much quicker to establish the tax due and a clarification of the law in 2008 made it illegal for developers to pass on this liability to buyers of their properties. Consequently, we ensured that none of our clients completing their purchase from developers have to pay this tax, even though the purchase contract may have stated that the tax would be the responsibility of the purchaser.
There are many factors that enter into the calculations of these fees and taxes but as a general rule of thumb, if you allow 8% to 10% of the purchase price you will not be far out.
Included in this is the solicitor or lawyer‘s fee and this will generally depend on how much time and work is involved in any particular purchase. These fees can vary greatly between one lawyer to another and not always will the final bill be what was originally estimated – however, the bonded lawyer that we can refer you to will not deviate from the fees quoted.
After the purchase of your property you will have community fees to pay to an owners association which is explained further under the heading of The Community of Owners.