What taxes and costs are involved in selling my property in Tenerife?
If you’re considering selling your property in Tenerife this e-book has been written for you to help you in your quest.
When you bought your property, you were probably caught up in the excitement of lawyers, the hustle and bustle of the notary office, translations, signing paperwork and the handing over of cheques and of course, getting your keys.
The thing is that your purchase is likely to be a distant memory and even if it isn’t, as a seller you’re on the other side of the table this time and the things that you have to do as a seller differ from what you had to do as a buyer.
This short book will answer all of your questions about the selling process, what taxes you need to pay, what you can attempt to claim back and what the costs of selling are.
What taxes and costs are involved in selling my property in Tenerife?
As a seller you’ll need to be aware of certain taxes that you’ll have to pay.
A lot of people have bought property in Tenerife over the years and sometime later want to sell.
Although for many people selling a property in their own country is not a task that is carried out very often and they probably won’t be that knowledgeable about it, it is normally easier to get to grips with the process there because it’s their own country, they speak the language and are normally able to ask for advice from a friend or family member who may have more experience in selling property.
As I have said on many occasions, when you’re buying a property in Tenerife, you really should use the services of a lawyer.
Maybe it’s a little more expensive than chancing it with the estate agent that is selling you the property and letting them do the paperwork but a legally registered lawyer with a liability insurance policy should help you breathe a little easier and have more faith in what you are buying here.
But what about when selling my property in Tenerife – do I need a lawyer…? I hear you ask.
As a vendor – Do I need to use a lawyer?
Well, the truth is, a vendor does not really need to use a lawyer unless there are certain circumstances, such as inheritance tax to pay or something else that needs doing which makes the sale a little more complicated.
Selling a property is much easier than buying it, so although you don’t need a lawyer, you will need to provide certain information to the buyer’s legal representative.
What information and paperwork do I need to provide when I sell my property in Tenerife?
Energy Efficiency Certificate. This should be done when you put the property on the market, but for various reasons, although against the law that was drawn up for this, most of the time they tend not to be done until the property has a buyer and the paperwork is being prepared for the notary.
The cost of an Energy Performance Certificate varies in relation to the size of the property but can start at about €100 for a studio or small 1-bedroom apartment, then work their way up from there.
What costs and taxes are involved in selling?
You’ll need to consider a number of costs when you sell. Just the same as when you buy a property in Tenerife there are costs, there are costs and taxes to sell one too.
We might as well get it out in the open first…estate agent’s commission. This is normally charged at 5% of the sale price plus the Canarian VAT (IGIC).
There are now some agents charging 6% plus IGIC, but whatever the cost, this will come out of your sales funds at the completion of the sale at the notary office.
As a vendor, you’ll also have to pay your Plusvalía.
This is a tax charged by the local town hall and is decided upon by them working out the increase in the value of the land on which your property is situated since you first bought the property.
So, it’s a tax on the increase of land value over a set time – the time between when you bought it and the day you complete your sale.
Here’s an example; if you bought the property years ago and there were no street lamps, your tax could be higher than that of a vendor that bought at the same time as you but in a more established area.
The land value may have increased more on a property that was built in an area with no street lamps and has been developed during the years of your ownership than the property in the well-developed area.
There are discounts on a sliding scale for vendors that have owned over a certain amount of years, so don’t think that if you’ve owned the property for 20 years, you’re going to be hit with a massive tax bill.
This money should be held back from you, the vendor, by the buyer’s lawyer at the notary office in order to pay the tax.
The buyer or legal representative takes the money and pays it on your behalf to ensure that the new owner doesn’t have that bill in the future.
You should also receive a document in due course to prove that it’s been paid.
3% Retention – What’s this?
If you are not fiscally resident here, then you will also have 3% of the property sales price retained by the Spanish tax authority – Hacienda.
This is to cover some or all of the capital gains over the years of ownership and other taxes that may not have been paid by you, the vendor.
If there’s more Capital Gains tax, then Hacienda will possibly come after you for that extra to top up the balance.
Capital Gains Tax
As it stands at the moment, you’ll be exempt from CGT if you’re under 65, a fiscally resident, the property has been your main dwelling for the past 3 years and you re-invest in a new main dwelling within 2 years.
I also think there’s something about the property having to be more expensive than the previous main dwelling…you should ask an accountant for the exact ruling.
If you’re over 65 and a fiscal resident when you sell, you’re exempt when selling your main dwelling if you’ve owned it for 3 years or more.
If none of the above applies, you’ll have to pay CGT.
It’s currently 19% but you’ll have already paid some of that with the 3% of the sale price that you’ll have already left behind for Hacienda.
What if I am fiscally resident – do I have to pay the 3%?
If you are fiscally resident, as a vendor can stop this 3% retention by providing a certificate from Hacienda to prove that you are fiscally resident and up to date with your taxes and that way the money will not be held back at the time of your sale.
Please note that I say fiscally resident…many people think that just because they have an NIE number or a Residencia that they are fiscally resident, that is not the answer, you must be fiscally resident.
Check this out with your fiscal advisor or gestor here.
The good news…
By the way, even if you are not fiscally resident but you are up to date with your non-resident taxes and don’t owe any more money to Hacienda for the Capital Gains tax then your fiscal advisor or gestor should be able to reclaim the retention for you.
…and if I’m not up to date with my taxes…then what?
..and…even if you are behind with your taxes, it might still be worth paying the taxes up to date and looking at what’s left…again ask a professional to look into it for you.
When selling a property in Tenerife, you’ll still have to pay your community fees, electric, water, rubbish and IBI up to the point of signing at the notary office.
This will all be checked out by the buyer’s lawyer to make sure that you are fully up to date with these as well.
Once again, if you’re not up to date, money will be held back from your sales proceeds before you receive them at the notary office on completion.
If you need help to sell your property in Tenerife, you can contact me via email at email@example.com or call me on 0034 610 18 27 44 or use this contact form to let me know and I’ll be answer any questions for you.