Tax. Either 6.5% ITP (Impuesto sobre Transmisiones Patrimoniales, a transfer tax) for resale properties, or 6,5% IGIC (Impuesto General Indirecto de Canarias, equivalent to VAT) on new properties. For new properties only, a document registration tax (AJD – Impuesto sobre Actos Jurídicos Documentados) of 1% will also be payable, making the “tax” on new properties 7,5% as opposed to 6.5% for a resale.
Land Registry. Your new property must be registered in the municipal land registry (Registro de la Propiedad), and the fee should be around half of the Notary fees, except for garages or parking spaces, where the fees will be around the same as the Notary fees.
Plusvalía. This is a tax on the increase in assessed value of the land on which a property is situated during a vendor’s period of ownership. Its proper name is Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana. It is calculated both on the surface area of the plot as well as the difference in its Valor Catastral (rateable value) between the point of previous sale and your own purchase. Plusvalía is usually in the region of a few hundred Euros, but can rise to several thousand Euros if a large amount of land is involved or the previous owner has held title for many years. Or, rather, this used to be the case. In many municipalities it remains at a few hundred Euros. The amount is often not known much in advance of signing, and sometimes not until afterwards, because it is calculated by the municipal authorities, some of which only produce the figure after completion. By law, the vendor is required to pay this tax, though in the Canaries, it has frequently been negotiated so that the purchaser is responsible. Over recent years, however, with an increasingly tough market and a tightening up of all procedures, vendors are much more likely to agree to pay Plusvalía as they are legally required to do.
AFTER THE PURCHASE
Water. This is usually paid directly to the relevant Water Board and is charged according to metered usage. Occasionally, it will be paid via a community who will meter usage internally.
Electricity. This is normally paid directly to the relevant Electricity Company and is also charged according to metered usage. Very occasionally, it too will be paid via a community who will meter usage internally.
Rubbish (Basura). This is usually paid directly to the municipal authority and is charged annually or half-yearly depending on municipality. Occasionally, it will be paid via a community where it will be included in the community charge.
Rates (IBI: Impuesto sobre Bienes Inmuebles). These are usually payable in May/June, or September/November in Adeje. The rate depends on the size, location and age of your property, and is calculated at around 0.45% of Valor Catastral (rateable value), or the chargeable base rate, base liquidable, if different to the Valor Catastral after a local rates revision.
Income Tax (Impuesto sobre la Renta). Residents and non-residents owning property or investments in Spain are obliged to file annual tax returns. The basic income tax rate has been 24.75% since 2012 as a result of the Government’s austerity measures (the original rate was 24%). On 20 June 2014 it was announced that the rate will be reduced to 20% from the beginning of 2015 and further lowered to 19% in 2016. Income tax is applicable to declared and notional rental income. This notional rental income – Impuesto Sobre la Renta de no Residentes – is assessed on non-residents even if they do not let out their properties; it is based on an assumption of a certain level of undeclared rental income deemed to be 1.1% of the property value (or 2% if the Catastral Value has not been updated since 1994), the value being defined as the highest of the price declared on the Escritura, or the Valor Catastral, or the value deemed by the municipal authority if the Escritura price is not accepted.
Wealth Tax. The tax rate ranges between 0.2% to 2.5%, depending on net wealth over a threshold of (now) €700,000 per taxpayer, so for a couple, this is €1.4 million! For non-residents it is applicable only to Spanish assets, so it will only be payable by the very wealthiest of property owners.CAPITAL GAINS TAX
The rules are different, however, for non-residents. When a non-resident sells a property, CGT is not the main immediate issue because non-residents are required to leave a 3% retention at the point of signing in lieu of final settlement of any CGT due. This 3% non-resident retention is payable at notary and is deducted off the whole sale price. It can be recovered, but requires an application to the tax authorities, and of course, requires also that all tax affairs are up to date, including the CGT against which the retention was made – in other words you pay the CGT on top of the 3% before claiming the retention back. These factors are why so many sellers just leave the 3% retention and never try to claim it back. If you wish to do so, you will need to submit an application, and for this you will need the original seller’s copy of the tax form paying the retention. This receipt is the seller’s property by right and something that s/he should have in any case, whether or not the retention is being reclaimed.
Special thanks to Janet Anscombe for the information on taxes.