What taxes and costs are involved in selling my property in Tenerife?
A lot of people have bought property in Tenerife over the years and some time 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 may not be that knowledgeable about it, it is normally easier to get to grips with 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.
Buying is such a distant memory…
When you bought your property in Tenerife, probably some years ago, you were probably led along by an estate agent with…hopefully…the assistance of a lawyer and now some years later – at the time of selling, your memory of waiting in notary offices, signing paperwork that had very little meaning, money being paid out left, right and centre and being handed the keys to your new place in the sun, are now faded and distant memories.
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 – 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 in Tenerife is easier than buying it, so although you don’t need a lawyer, you will need to provide information to the buyer’s lawyer.
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, they tend not to be done until the property is sold. The cost of an Energy Performance Certificate varies in relation to the size of the property but 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 as when you buy a property in Tenerife there are costs, there are costs to sell one as well.
We might as well get it out in the open first…estate agent’s commission. This is normally charged at 5% 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 Plus Valía. 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 bought the property in the first place. So, it’s a tax on the increase of land value over a set time.
If you bought the property years ago and there were no street lamps and no rubbish collection, for example, your tax could be higher than that of a vendor that bought in an established 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. Once again, 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.
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 a certain amount of the capital gains over the years of ownership and other taxes that may not have been paid by the vendor.
If there’s more Capital Gains tax, then Hacienda will possibly come after you for that extra to top up the balance.
The only way that you as a vendor can stop this 3% retention is by providing a certificate to say that you are fiscally resident and up to date with your taxes and that way the money will not be held back. Please note that I say fiscally resident…many people think that just because you have an NIE number or a Residencia that you are fiscally resident, that is not the answer. Check this out with your “gestor” or fiscal advisor here.
By the way, even if you are not fiscally resident but you are up to date with your non-resident taxes then your fiscal advisor should be able to reclaim the retention for you…even if you are behind with your taxes, it might still be worth looking at to retain what’s left.
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.