Non-Resident Imputed Income Tax in Tenerife – NRIIT

I’d like to point out that this article IS GOOD ADVICE but in no way replaces any legal or fiscal advice, so please don’t take it as such. Rates and laws change all the time and you should seek that information from your legal and fiscal advisers.

At times life can seem unfair…especially at the end of the year.

No, I don’t mean that you don’t get the presents that you want at Christmas, I mean the dreaded tax man.

“Class… does anyone know what the word – Impute – means?”

“Anyone?” “Anyone?” – a nod to Ferris Bueller.

OK…from one of the online dictionaries, the word Impute in financial terms means:-

To assign a value to something by inference from the value of the products or processes to which it contributes…ie “recovering the initial outlay plus imputed interest”

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The Tenerife Property market during 2017

10 years after the brakes were put on the rising prices…how is the Spanish market, especially the Tenerife property market?

During the Spanish property boom, prices went through the roof but abruptly came to a screeching halt in 2007 when the ceiling fell in on the property market – I hope you liked the use of the carefully chosen property oriented words there.

Prices crashed throughout Spain and drops of anywhere between 30%-50% were found depending upon the area that the property was situated.

The Tenerife Property market during 2017 — Of course, Tenerife was hit, and quite badly, but not nearly as badly as the mainland.

Here, prices dropped in the region of 35% in comparison to their highs of 2005-2006, but being an island with limited building land and of course an island with sun, the prices were always going to be better than a lot of other areas of Spain.

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Have you missed the boat or is this the perfect storm?

Have you ever, during your lifetime…just felt that you should have done something a while ago, but now feel that it’s too late and maybe you’ve missed the boat?

I wasn’t in Tenerife 25 years ago, but I very often wonder that if I was, would I have bought property or would I have thought it was too expensive at that time.

When I hear or see what some of my sellers paid 25 years ago for the property they’re selling now, I always think to myself that if I was here then, at that price, I’d have bought them all.

But of course, it’s all relative.

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Buying property in Tenerife

Have you missed your opportunity in buying property in Tenerife?

Have you ever, during your lifetime…just felt that you should have done something a while ago, but now feel that it’s too late and maybe you’ve missed the boat?

I wasn’t in Tenerife 25 years ago, but I very often wonder that if I was, would I have bought property or would I have thought it was too expensive at that time.

Have you missed the boat or is this the perfect storm?

When I hear or see what some of my sellers paid 25 years ago for the property they’re selling now, I always think to myself that if I was here then, at that price, I’d have bought them all.

But of course, it’s all relative.

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Getting a mortgage in Tenerife

If you’re here to learn about what you’ll need for a mortgage to buy a property in Tenerife, skip to the writing below the mortgage calculator and read on – if you’re here to see if you can obtain a mortgage through our preferred mortgage broker, click their logo below to go directly to their enquiry form where they’ll be able to help you.

Getting a mortgage in Tenerife

With Spanish mortgage rates being the lowest they’ve been for years and lending in general becoming a little more flexible, mortgage lending in Spain is increasing, so let’s see how easy it is getting a mortgage in Tenerife.

It’s still not easy to get a mortgage as a non-resident…or even as a resident for that matter but nevertheless…it’s becoming a little easier.

All Spanish banks deal with residents looking to borrow money via a mortgage and they also deal with non-residents but Spanish mortgages for non-residents are more difficult to obtain and there’ll be a few more hoops for you to jump through too.

I thought I’d write an article about the process and what’s needed to get a mortgage in Tenerife because my last article was written a few years ago and also written during the financial crisis, when Spanish mortgages had all but disappeared…and the article was very negative and not very up-beat.

In this article, I’m going to write about non-resident mortgages in Tenerife because if you’re a resident, you’re already living here and can pop into pretty much any bank in Tenerife and find out what you need to do to get the ball rolling.

I’d also like to point out that as I write this article in 2017, lending procedures and criteria are still evolving, so what I’m going to write isn’t cast in stone and banks will differ to each other in their lending amounts, loan to value calculations and criteria.

As a non-resident you’re generally going to be allowed up to 60% loan to value (LTV). This means that the bank will lend you 60% of the value of the property or the purchase price whichever is the lower. So, thinking about the last few words of the previous sentence, one thing to consider here is that just because they say they’re going to lend you 60% doesn’t mean that it’ll be 60% of the purchase price.

Here’s what I mean – and skip this bit if you know what I’m about to say – if you’re buying a property for €200.000, that’s the agreed price between you and the seller, that doesn’t automatically mean that you’ll be able to borrow €120.000 though.

The bank will want to have the property valued and if the property is then valued at €180.000, then they’re only going to lend you 60% of that value, not the €200.000 agreed purchase price. This new lending figure is €108.000 that’s €12.000 less than the €120.000 you originally thought they’d lend you…and now, you’re going to have to find that extra €12.000 yourself if you want to carry on with the purchase.

One thing you could do is see if the seller will come down a little in price so that you don’t have to find as much extra cash…but as I write this article, prices have stabilised well here in Tenerife and increasing in some areas…so there may be little chance of that.

Now, if you know anything about buying a property here (and if you don’t you might want to hop over to my videos about how to buy a property in Tenerife), you’ll know that to remove the property from the market, you need to put down a 10% deposit…and this is non-refundable…so what happens if you’ve agreed to buy the property for €200.000 and it gets down valued, in the example above and you can’t find the extra €12.000?…well, you’ll lose your 10% deposit.

What can you do? Maybe before you get into signing contracts and completion dates you can ask the agent to ask the owner if they’ll be prepared to refund the deposit if you’re unable to obtain a mortgage within a certain time-frame… that’s what we do here at Tenerife Property Group. We agree with the vendor that the buyer can have 14 days to arrange a mortgage and if they can provide written proof from the bank that confirms that they can’t go ahead, they can have their deposit back. We think that’s a fair way of going about it.

Lending criteria here can be a little tougher than in your home country. Because you’re a non-resident, they’ll want to know everything about you…and a little bit more at times too.

I very often get asked “What do I need to provide to get a mortgage in Tenerife?”

Here’s a list…although not definitive because as I said before, lending amounts and criteria change from bank to bank.

You’ll almost certainly need to provide the following if you’re a UK mortgage applicant.

Last P60
Last 6 months payslips
Last 6 months bank statements
Credit report (www.experian.co.uk) for all applicants
Last annual mortgage statement (UK main residence)
Copy of employment contract if P60 is not available or if you’re working in a tax exempt industry
Proof of deposits. The bank requires proof of the difference between the purchase price & amount of mortgage requested from the lender.

For self-employed individuals: (In the UK)

Latest Self-Assessment Tax Return
Profit & Loss accounts for that return
Balance sheet up to date
Last 6 months personal & business bank statements
Credit report (www.experian.co.uk) for all applicants
Last annual mortgage statement (UK main residence)
Proof of deposits. The bank requires proof of the difference between the purchase price & amount of mortgage requested from the lender.

You’ll also need your passport and NIE number and if you haven’t got your NIE number yet, you’ll need to get that before the bank will go much further with a decision.

A mortgage application generally takes between 4 to 6 weeks to obtain, depending upon how quick and organised you are in getting the required paperwork to the lender.

There are a number of different types of mortgages but generally speaking they’re capital and interest repayment type mortgages, rather than interest only and most lenders will only lend up to the oldest borrower being 75 years old.

Rates can be fixed or variable but more often than not, they’re variable following the EURIBOR rate of interest.

As I said earlier, getting a mortgage in Tenerife isn’t the easiest of things to do but it is possible with the right paperwork to present to the lender, that’s why using a mortgage broker might be the easiest way to go, that way, you’ll probably stand a better chance of getting one.

Why do the same properties for sale in Tenerife have different prices or are sold – yet still being advertised?

If ever you’ve been looking for a property for sale in Tenerife on the internet, you’re almost sure to have come across this problem in the past.

There you are searching away…all the websites look the same…most of the properties you’re interested look very similar or even duplicated with different agents but the same photos but, after plenty of searching, you come across the property that you’ve been dreaming of buying for years.

It’s perfect in every way, the amount of bedrooms, the view, the pool and the area…all perfect and then there it is…the price, “wow” you think…”that’s just over our price limit but maybe, just maybe we can afford it”.

You save the page on your internet browser and keep on looking, “There’s bound to be something else out there that will fit my criteria just as well…but hopefully a bit cheaper” you think, so you carry on with your search.

Then you see it, the same property but €10.000 cheaper…”???”, well that’s it then, you can get it for just the amount of money you’ve set aside for it, “Perfect” you think and you can’t wait for the next day to come around so that you can call the agent.

You settle down to read the local property newspaper – Tenerife Property Guide – and surprisingly you see the same dream property for sale, with yet another agency…and…at even less money, another €5.000 saving…you just can’t believe your luck.

The next morning you’re chomping at the bit and can’t wait until 9am…the clock strikes 9 and you’re on the phone to the agency with the least expensive price, they tell you they’ll call the seller and will come back to you with a date and time for your appointment to view it.

Fantastic…you can’t wait…but wait you do…

Finally, they call you back only to tell you that the property has been sold…” What???” …”but you’re advertising it in this month’s paper” you say, hoping that they’re mistaken…“How can it be sold?” you ask.

So, what’s happened? How has this come about?

Very often what happens is that a seller puts their property on the market and often want the agency to price the property at the price the vendor wants and hence, they price the property over the market price.

Here in Tenerife, an agency will often take on a property for sale at any price, just happy in the knowledge to have a property for sale on their books.

After six months of it being for sale with the first lot of agents at the higher price and having had no viewings or interest whatsoever, the seller thinks that the agents aren’t doing their job very well at all, so they search for other agents…

This time the seller decides to reduce the price and send out photos and information via email to several other agents.

Those agents add the property to their websites and wait to see what happens.

After another 3 months of waiting, there’s been nothing but crickets…even though the property has been reduced in price, there’s still very little interest.

The seller has had a couple of viewings but no concrete offers, so the downbeat seller decides to put it with another couple of agencies and one of the more switched on agents tells the seller what the true market price really should be, the seller takes the advice and the property is priced accordingly.

The seller forgets to tell the agencies that have had it for sale for the previous months that the price has been reduced to a more realistic price and to top it all, 4 weeks later the property sells.

During all the excitement, paperwork chain and notary visits the elated seller forgets to let the other agents know that the property has now sold as well.

So, let’s look at how this has played out. Estate agency number 1 has it at the highest price, estate agency 2 has it at a reduced price and then agency 3 has it at the lowest price and sells it.

Now, even if the seller managed to remember all the agencies that had it for sale at the higher price and told them about the price drop…there’s a strong possibility that not all of the agents would have acted on it anyway.

This could be lack of time, lack of staff, just plain forgetting to do it.

The seller could also have forgotten to tell them that the property has been sold…so there’s the other problem.

The same property on the Internet with the same photos and different prices…oh, and it’s sold as well.

Well, if we know the problem, what’s the possible solution?

At Tenerife Property Group, we try hard to keep in contact with our sellers on a regular basis. This way, we do our best at keeping the properties we have for sale up to date regarding availability and price.

Of course, it doesn’t always work. The day after we’ve been in contact with the seller, maybe the property sells, so it could be 3 months before we’re next in contact with them, so we could be in the same boat as agent 1 or 2…

To keep up with the changing prices of property and if they’re still available for sale, is not the easiest of things to do and it must be said that some of the lesser honest agents will almost certainly be keeping some of their better priced properties advertised in the hopes of attracting potential buyers…but hopefully now, if you come across this problem, you’ll understand why there are so many duplications and different prices being advertised for properties for sale in Tenerife.

All I want for Christmas – Mariah Carey

All I want for Christmas…

November 1st 1994 and Mariah Carey released the lead single from her 4th album – “All I want for Christmas is you”.

With sales of over 14 million copies, this song is Mariah Carey’s biggest International hit and is apparently the 11th best-selling single of all time and is reported to have earned over $50 million in royalties.

OK, so what…I hear you ask…does this have to do with real estate in Tenerife?

With her Christmas single being one of the best-selling singles ever and James Corden having just recorded a new Carpool Karaoke with the star herself singing the world-famous tune, I wondered what type of property would Mariah Carey buy in Tenerife?

In December 2013, she was estimated to be worth over $500 million, so to work out what property she might like to buy in Tenerife let’s have a look at the property that she had at the time.

– Polished hard wood floors

– A cinema room with a sofa per person

– Bedroom ceilings with pink and blue clouds painted on them

– An island…but not in the kitchen, in the bathroom…!!!

– A room that’s reminiscent of a winter mountain lodge that can seat 100 with wood beamed ceilings and an open fire

– An inside basketball court and gym

– A Moroccan style Gazebo chill-out area

– 360º panoramic views ranging from the city to the sea & to the mountains

– A swimming pool, with her initials on it tiled in the centre of the floor

OK, well that’s a start about finding out what she likes but in 2014 she sold up and moved into rented accommodation.

Paying between $250.000 and $350.000 per month (I can’t get a confirmed figure) she and her boyfriend at the time, James Packer, moved into a fantastic mansion in California.

The property is situated on over 4.000m2 of land and measures between 1.200 and 1.700 m2 inside (again, it’s hard to get a confirmed figure). Just to put that measurement into proportion, the average large town house here in Tenerife measures 90m2 inside and a large villa that you might see in the hills of Roque del Conde might have inside measurements of between 400 – 500m2. So, this rented property could fit about 3 or 4 good sized villas inside it or nearly 19 town houses…madness…

Mariah Carey’s rented property has a massive modern kitchen with the obligatory island, a cinema room (with luxury chairs as opposed to the sofas), a sauna and a gym and a fabulous natural lagoon type swimming pool, a basketball court (outside this time) plenty of parking inside and out and fabulous views.

Due to the attention to details, the property is reported to have been built over a 5-year period and is apparently on a lease with an option to buy – it’s never been on the market since it was first built.

In fact, I found out where this property was and took this from Google Maps, it’s an overhead shot of the property…

But trying to get a street view of the property from outside the front door was impossible.

Evidently, even the Google car couldn’t get any further than the guard house of the secure gated community…so this is as far as we get.

Hardly surprising because within that community she can count the Kardashian Family and Justin Bieber as neighbours, all of whom I’m sure love their privacy.

So, where does that leave us in Tenerife?

A quick search of properties for sale in the south of Tenerife reveals that there’s isn’t anything for sale of 1.700m2…but hang on, I’m sure we can still satisfy Mariah.

I’ll have to admit that I haven’t seen any properties with a full size basketball court but I have seen plenty of villas with gyms, saunas, swimming pools, massive garages and fabulous views.

We’ve got one for sale ourselves, it’s big at 625m2 but would still fit 2 to 3 times inside her rented place, it’s got great views and an infinity pool which makes the most of the views out to sea and La Gomera but at 5 bedrooms…but with 5 bedrooms and just over 600m2 – is it big enough for Mariah?

This fantastic villa has a gym and a sauna, a garage large enough for 4 or 5 cars and it’s secure with steel shutters and alarms…but as the Google car has been allowed past the house on the road outside…is it secure enough for our Mariah?

The kitchen is fabulous, a chef’s delight…oh and it’s got a great island too, but I must confess, there’s no island in the bathroom like her previous home, so is it luxurious enough for her?

And priced at less than €3 million, that’s pocket change for her, is it expensive enough to meet her tastes?

There’s only one other property that springs to mind, I’ve never been there, I doubt I ever will…if I do, I’ll let you know…but the one I’m thinking about is the Castle in Bahía del Duque.

You know the one, the one that’s on that bit of land that juts out into the sea in Bahía del Duque.

This one…

Owned by Santiago and Noelia Puig both massive land owners here in Tenerife and she a 60’s beauty queen.

It’s not for sale, well, not that I know of and if it was, I don’t know how much it would be up for.

I haven’t got a clue what’s behind the doors regarding the number of bedrooms, if it’s got a gym and sauna…I just don’t know.

it’s definitely got a pool, I can see that from the Google Maps overhead shot and it certainly looks exclusive enough, so maybe it could fit the bill for Ms Carey…

Well, Mariah, if you’re reading this article and you’re thinking about buying a villa in Tenerife and you think you might want to see some property that might suit you…let me know…you know where you can find me…

7 myths debunked about buying property in Tenerife

The government can knock down your home legally whenever they want.

This has come about over the past few years from stories of properties having been built illegally and were therefore knocked down. The thing is that the developers more than likely paid the local town councillors who then paid other relevant people and “building permission” was given.

I’m not saying that those types of envelopes haven’t been passed about here in Tenerife but thankfully the only properties that I know about that have been knocked down by the government here are the ones that have been built dangerously too close to the coast and are affected by the Coastal law.

If you’re buying a property in Tenerife, make sure you use a lawyer and if you’re concerned about the legalities of your intended purchase, get them to look into it for you.

Click the following link to get your questions answered about buying a property in Tenerife

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How much is my property worth in Tenerife?

How much is my property worth in Tenerife? – A question that arises quite often in my world.

If you’ve sold a property in the UK over recent years, you’ll have heard of Zoopla. On this site and maybe some others do it now as well, there’s data about how much the houses in your particular road sold for over the last few years – I’ve just looked at their website and seen that some records go back even 20 years.

So, the question is, how much is my property worth in Tenerife and how do you work it out?

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Is the non-refundable 10% deposit law in Spain unfair?

Something happened to me this week… something, that during the years that I’ve been providing a service to buyers and sellers of property in Tenerife, I’ve often wondered what would actually happen if it ever came to it.

That “something” was that a buyer didn’t complete on their proposed purchase…madness I know, but totally out of the buyer’s hands unfortunately and a sad occurrence for both buyers and sellers.

This caused me to wonder if the 10% non-refundable deposit is fair or not.

What’s the law about buying property in Tenerife?

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Why I think the real estate industry in the Canary Islands should be regulated

Should the real estate industry in the Canary Islands should be regulated?

I’m concerned about the Real Estate industry here in Tenerife and when I say concerned, I’m really concerned.

I’m not worried about the market itself, that’s doing well at the moment – what worries me are some of the agents and some of the people within the industry.

As the property market eases and the crisis seems to be less of a concern, there are more and more estate agency offices popping up all over the place. I’ve only got to pop into Los Cristianos or some other town that I haven’t been to for a while and see shiny new offices with their white leather chairs and glass topped desks all over the place.

New estate agents popping up every couple of weeks

It really doesn’t cost much to open an office and start selling property, what does take time though, is the trust and reputation that is built around agents and their businesses throughout the years of trading and the experience gained through that process.

The fact that it doesn’t take much to open an estate agency office is the reason that there are so many popping up but with this comes a higher risk to buyers and sellers and also a possible problem of undeclared income and unpaid taxes.

In the UK there is some sort of regulation with the NAEA, it’s a voluntary association that self regulates the industry. In the Spanish mainland there are exams and registrations to go through to join the professional college and then the agents are regulated, in the Canary Islands on the other hand, there is nothing.

I for one, although I’m certain that I’m not the only one, would like to see exams for agents and office owners and from there, regulation with regard to transactions that take place. This exam would be written in Spanish and office and company owners should take an exam to allow them to run an office and there should be a separate exam for agents that want to work in those offices.

It’s a bit like they have in the United States with offices run by Brokers and agents working in those offices.

Exams for agents

The exam doesn’t have to be really hard and doesn’t mean that there has to be months of studying for it either, nor does it have to be expensive but once completed, the relevant agent would receive their registration number for the duration that they wanted to work in the industry and then they’d be able to trade within an office of their choice and if in time they wanted to open their own office, then they’d eventually take the office or company owners exam.

If the exam idea was taken up, then each person that passed the exam would need to declare their number and the office owner’s number at any notary signing and it would be recorded on the deeds for the property transaction that they were dealing with. This would enable anyone that had problems or concerns after that transaction had completed, to be able to trace the paperwork back to the selling agent’s office.

There are just too many new offices opening with inexperienced people running them, hanging on the coattails of those agents that successfully made it through the tough years of the crisis and out through the other side and now those inexperienced agents make mistakes or carry out poor work thus adding more fuel to the fire of untrustworthy estate agents in Tenerife.

The fact is, with so little regulation that anyone can sell property here which means that it’s open to a lot of abuse, at times there are no taxes paid which could also mean that buyers and sellers are put at risk because possibly their property sales or purchase taxes are not being paid.

A few weeks ago I was asked to show one of our properties to another “agent” who showed up still smelling of the previous night’s alcohol. We showed the property to the potential buyers who afterwards told their agent that apart from being on the complex they were actually interested in, the apartment was hardly close to the property they were looking for as it had only 1 bedroom and they were looking for 2.

Estate agent’s professionalism…

When it comes to professionalism here in Tenerife estate agents probably have one of the worst records. By having registration of offices and agents, I feel that the whole industry would be better for it, the buyers and sellers would be protected better and we as an industry would be looked at in an improved light.

This could lead to better things in the future, maybe with sellers then being happy to sign exclusivity agreements and there could then be fairer competition amongst agencies rather than the scrabbling around and underhand ways some agents go through to find properties for sale or buyers to buy them.

If this all did come to pass, I’m sure there will be ways for people to circumvent the rules but it would at least reduce the number of people out there that are putting buyers and sellers at risk.

Just sayin’

What will happen to the Spanish property market and expats after Brexit?

OK, I can be wrong … just ask my wife.

The vote for a Bremain result was fully expected to win the day but after all was said and done “team Brexit” was declared the winner.

If you’ve been watching the British news and are keeping tabs on the Internet, you’ll be well aware of what’s happened and, in many people’s eyes…well 48% of the UK, the massive mistake that has been made.

I for one, and I’m on record as having said it, did not think that the UK would break away from the EU. I was confident that it would be too much of an upheaval for the British public especially when it seems to me that the 2 most important points for those voting in favour of a Brexit were 1, strict rulings against immigration and 2, wanting to have a dig at the current government and their team of “Bremainers” … now we’ll get to see if the voters that have got their way have in fact voted well … my own opinion is that I’m concerned about their reasons for voting for a Brexit and think that they haven’t voted sensibly.

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