You have located the property in Tenerife you want to buy what happens now?
A 10% deposit is the standard down payment on a resell property.
The seller and the buyer must now sign a contract which will include a final completion date and the method and schedule of payments.
Your estate agent or Abogado (Spanish qualified and registered Lawyer) then has the obligation to collect all current to the day receipts to confirm that no debts exist on this property.
Paperwork and documents consist of:
Nota Simple (Details and verification of the current owner and whether there are any outstanding mortgages, debts or embargoes on this property).
IBI Ayuntamiento Town Hall rates.
Electric and water supply bills are paid.
Community fees payments are paid to the current date, the elected Communidad President as well as the secretary must sign to say all receipts are paid up to date.
Copy of Title Deeds known as Escritura.
The original documents must be presented upon completion day in order for the Notary to sign the Escritura Title deed.
In certain scenarios it is possible to declare you have been informed and are knowledgeable that some receipts are not included and missing.
If the current Owner has an existing mortgage on this property, this will be paid and the existing mortgage cancelled and the termination registered at the same time as you sign at the Notary, usually the Banks Representative will attend the Notary to ensure this.
The compulsory Taxes and Legal Fees are as well as the purchase price and as a rule you should generally allow 8% to 10% of the new declared purchase price on the Escritura. These are:
6.5% Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados Modelo 600 (Transmission Tax) of the declared purchase price on the Escritura Title Deeds when purchasing a resale home.
On New Developments the Taxes due when buying a new property is 7% Impuesto General Indirecto de Canarias (commonly referred to as IGIC) Canary Islands General Indirect Tax of the amount stated on the Escritura Title Deeds.
Current rate of IGIC 1st July 2012 was increased to 7% from 5%.
Notary fees Set range of fees according to the purchase price.
Land Registry Office.
Plus Valia is an added value tax calculated upon the increase of the Ayuntamiento value of the price per square metre OF THE LAND from the previous Owners purchase to the present sale.
What is a Contrato de Compra Venta (Private Sales Contract)?
A private contract which both the purchaser and seller sign.
It must indicate the correct owner, legal description of the property, the scheduled dates for payment, the currency to be used the purchase (euros, UK pounds, US dollars etc) completion dates and schedule, amounts and penalty conditions.
It is standard practice that the seller agrees to pay the penalty of double the amount of the deposit paid should he decide not to proceed with the sale and pull out from the sale and the signed contract.
It is also standard procedure that a penalty be paid by the buyer for the amount of the deposit should the buyer change his mind and decide not to proceed with the purchase and pull out from the contract.
IBI Impuesto Sobre Bienes Inmuebles
IBI Impuesto Sobre Bienes Inmuebles Local rates are paid to your local Ayuntamiento once a year, and are determined from the rateable value of the land assigned by the local Ayuntamiento eg Adeje or Arona.
Rates are generally much lower than in other European countries.
Basura (Refuse Collection)
Basura the refuse collection rate is applied by the Local Ayuntamiento according to the property and is due for payment every 6 months.
Water consumption is calculated by a water meter and is due for payment every 1 or 2 months.
Payment is usually collected by bank direct debit.
If your property is located on a Residential or Touristic complex then you will be subject to an annual community fee to cover the expenses of the complex maintenance, swimming pool maintenance and cleaning, gardeners, reception, street lighting, security.
The community fees on touristic complexes tend to be higher than on Residential Complexes due to more onsite facilities.
According to the number of the properties of the complex and the amenities onsite and services provided, this can be between 80 Euros to 200 Euros per month.
Charged bimonthly with minimum rates applicable (whether you are live there or not).
Remember you use a lot less electric in Tenerife as no heating is required.
Standard rates vary according to equipment installed, but can be in the region of approx 15 Euros per month for telephone line rental.
Broadband ADSL internet is available in Tenerife, although speeds here are lower on average than in other European countries.
New Spanish Law introduced on 1st June 2013 declares that Certificado de Eficiencia Energetica (CEE) is a Legal necessity for properties throughout Tenerife and throughout the Canary Islands, as well as Spain that are for sale.
All Vendors are required by Law to produce this Certificate to potential buyers as well as the Notary.
The energy rating etiqueta must also be incorporated in advertising including on real estate agents promotions, adverts, websites and windows.
This simple certificate will designate an energy rating to your property on a scale from "A" (the most efficient) to "G" (the least efficient).
The Law is by order of Royal Decree 235/2013 of 5th of April 2013 which approved the owner of a house, apartment or building that is for sale or for lease must be in possession of this Certificate.
Also the energy efficiency etiqueta label must by Law be included in any marketing, promotion and advert related to the sale or rental of a property.
Real estate agents must also include the energy etiqueta in their advertisements.
These are a basic certificate which can only be issued by Arquitecto Tecnico, Ingeniero or an Ingeniero Tecnico Colegiado, Government Approved Architects or technical engineers.
What are the various ratings?
A Most Efficient
G Lowest Efficiency
How long is the Certificate Valid for?
At the moment the energy certificate is valid for 10 years.
Does the Owner pay for the energy certificate?
The owner of the property for rental or for sale must pay.
How much does the energy certificate cost?
The price to issue the Certificate will be determined by elements such as thickness of walls, amount of windows, square meters.
What if I am selling my home and it receives a very low energy rating, E, F or G, am I required by Law to carry out any improvements?
No, you are not required to carry out any home improvements even if your property has a low rating.
As expected the majority of Homes in Tenerife have a low F or G Rating.
Are there any exclusions?
If your property was constructed and completed later than the year 2007 you may already have an Energy Efficiency Certificate.
To determine this consult the architect or construction company who designed your Property.
Also Exempt are properties that have a construction area under 50m2.
This refers to independent buildings of less than 50m2 and detached separate properties such as outbuildings and sheds.
Other exemptions include:
Buildings that are bought for major renovations works or demolition
Buildings or sections of buildings that are utilised for less than four months per year.
Properties whose energy usage is less than 25% of the consumption for a whole year.
If a long term rental contract in already in place.
The owner of the Property can sign a statement in front of a Notary if they consider their property to be exempt.
This signed statement must then be provided with sales and rental contracts.
How is my Property rating assessed for an Energy Certificate?
An Architect or Engineer registered with the Government to issue the Certificates and Ratings will take measurements, readings and recordings from your Property such as your air conditioning, hot water system, solar panels, heating (not often found in Tenerife), thickness of walls, type of windows fitted, insulation, construction etc.
The recordings the Architect or Engineer collates will then be inserted over the internet into the Governments software which then calculates the rating for your property calculating the energy efficiency.
The software programmes are the same for all properties so a prospective buyer will be able to view the projected energy costs for each property viewed.
Your Technical Engineer or Certified Architect will then register your Certificate and Rating in the Industria Registry along with the Catastral reference specific to your property.
What if I do not apply for a Certificate?
If you do not obtain a CEE when selling you could be issued a large fine by the Spanish Government.
The Estate Agent could also face Penalties
How will my Propertys Energy Certificate be Recorded in the Government Registry? REFERENCIA CATASTRAL
Catastral Reference will tie the Certificate to your Property and be registered with the Government.
The Property Catastral Reference is a reference comprising numbers and letters which you can find on your Escritura and which you can also find on your IBI (Ayuntamiento Rates) and Basura (refuse collection).
RESIDENTS / NON RESIDENTS
If you live for over 182 days during the Fiscal year (January 1st to December 31st) in Tenerife the Canary Islands and Spain, you will be automatically classed as a Fiscal resident of Spain for fiscal tax status and declarations.
Should you reside for less than 182 days during the Tax year (January to December) in Tenerife Canary Islands Spain, you will then be classed as Fiscally non-resident for fiscal tax status and declarations.
Modelo 210 Impuesto sobre la Renta de no Residentes
Usually referred to as Non Residents Tax this is due for payment once every year by all Non Resident Owners who have bought a property in Tenerife Canary Islands, it is commonly referred to as Non Residents Tax which you will pay to the Tax Authority known as Agencia Tributaria (commonly called the Hacienda Tax Authority).
This is an obligatory tax due for payment once each year by all persons who are Fiscal Non Residents in Spain Canary Islands and Tenerife but who own property here in Tenerife, which is not their primary home.
The Non Residents Tax rate is currently 24.75%.
This Tax rate was raised to 24.75% from the tax year 2012.
It was 24% in previous years.
To work out the rate due for payment you must determine the property Valor Catastral (cadastral value), this information can be seen on Municipality Ayuntamiento I.B.I. receipts Municipality rates).
Multiply the Catastral Value by 1.1 % if the Valor Catastral has been amended since 1994.
Then multiply this amount by 24.75 % and the answer is the amount of Tax due to be paid.
The Impuesto sobre la Renta de no Residentes is due for payment and declaration once a year every year for the preceding calendar year.
If a property is jointly owned by a couple (whether married or not) then both husband and wife must both independently file Individual Non Residents Tax declarations.
EXAMPLE: Properties with a Catastral Value set by the local Ayuntamiento of 114,746 € amended after 1994.
The amount of Tax due for payment to the Hacienda (Spanish Tax Authority) each year is 114,746 € x 1.1% x 24.75%: 312.40 €
It is worth remembering that the catastral value of a Tenerife property is usually much lower than the sales price and current Market Value.
Impuesto sobre el Patrimonio Wealth Patrimonial Tax Modelo 714Patrimonio is a tax you must pay once a year every year when you own a property in Tenerife Canary Islands Spain only if all your combined assets in Tenerife Canary Islands Spain are valued in excess of 700,000 euros.
This Patrimonio Wealth tax is only for persons possessing Assets, Properties and Funds valued in excess of 700,000 Euros in Spain including Real Estate and Monies in Spanish Bank Accounts.
If a person is deemed Non Resident for tax purposes then this Patrimonial Wealth Tax is only applicable to assets in Spain and Spanish Governed regions including the Canary Islands.
Patrimonio Wealth Tax had in effect been a dormant Tax as it was reduced to 0% in 2008 but was been reintroduced to raise coffers for the tax year 2011 and subsequent years.
This Tax is due for payment once a year for the preceding year, the Tax for 2012 is due for payment in 2013.
The percentage tax rate varies across several thresholds from 0.2 % to 2.5%, over the minimum threshold of 700,000 Euros worth of assets.
If a property is jointly owned by a married couple then both Husband and Wife must file individual Patrimonial Wealth Tax declarations.
Both husband and wife must each file individual tax declarations if any assets and properties are in both names, raising the threshold to 1,400,000 Euros for a married couple.
The Patrimonial Wealth Tax is calculated on the Higher value of either:
1. Escritura the purchase price stated on your Escritura
2. Valor Catastral is the value of a property set by the local government for Rates purposes.
The valor catastral is usually much less than the market value of a property.
The cadastral value of properties can be found on your Local Municipalitys Ayuntamiento IBI (Rates receipts).
These guidelines are meant for information purposes only and describe standard purchase scenarios.
However this guide is not meant to replace legal advice, which we always recommend you seek.
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