Taxes for buying a property in Tenerife

What taxes do I have to pay when buying a house in Tenerife, and in Spain in general? In general terms, taxes directly related to the purchase of a finished home are around 10% of the price. In tax terms, a distinction must be made between new homes—acquired directly from the developer or builder—and second-hand homes.

• New home: For new properties, the buyer pays 7% of the value as the IGIC (General Indirect Canary Islands Tax), in addition to the Transfer Tax and Documented Legal Acts Tax (in this case, under the modality simply called Documented Legal Acts Tax), which taxes notarial documents.
• Second-hand home: In the case of second-hand homes, the buyer pays the Transfer Tax and Documented Legal Acts Tax (in this case, under the modality called Onerous Property Transfers). The amount of this tax in Tenerife is 6.5% of the purchase price. For more details, contact us by phone or email.

On the seller's part, they will be responsible for paying the Tax on the Increase in Value of Urban Land or "municipal surplus value"—a tax paid to the municipality, which taxes the increase in the price of the land on which the property is located. The buyer is also responsible for the Capital Gains Tax, commonly known as "state surplus value," which taxes the difference between the original purchase value and the selling value. In summary, in the sale of a second-hand property in Spain, the taxes to be paid are as follows:

• The buyer pays the Transfer Tax and Documented Legal Acts Tax.
• The seller pays the Tax on the Increase in Value of Urban Land (IIVTNU), or "municipal surplus value," and the Capital Gains Tax (or "state surplus value").

WHO PAYS THE EXPENSES FOR THE MORTGAGE WHEN BUYING A HOUSE IN SPAIN

In the event that the buyer takes out a mortgage to pay for their home in Spain, who is responsible for paying the expenses generated by the mortgage? According to the new Spanish mortgage law, which came into effect on June 17, 2019, the expenses generated by the mortgage (notary, registration, management, and Documented Legal Acts Tax) are entirely paid by the bank.

MORTGAGE FOR NON-RESIDENTS

Buying with a mortgage in Spain can be for both residents and non-residents. However, there is a certain difference between mortgage loans for foreigners and residents. The differences relate to both the list of required documents and the loan amount. Therefore, for EU residents, banks can approve up to 70-80% of mortgages, while non-residents can obtain between 50 and 70% of the property price on credit.