Tax, Tax & More Tax in Tenerife

Sunway Tenerife The Estate Agents

When buying a property, one of the main and most expensive extra charges is sales tax or as it is also known, stamp duty.

In the Canary Islands, as elsewhere in Spain, in order to determine the rate of sales tax depends whether property is new or second-hand. If it is new it will typically be sold by the construction company responsible for its development, or as a result of the economic crisis, it may be a bank which has foreclosed on the construction company that is selling the property.

In either situation it is still regarded as new and therefore attracts a standard sales tax or VAT. In Spain this is known as IVA and in the Canary Islands which has a different sales tax than mainland Spain, this is known as IGIC.

The rate of IGIC is typically 5% although this is due to be modified and reduced to 2.75% where a new property is purchased with the intention that the property shall be the principal personal residence of the purchaser. There is a limit of €150,000 on the value of the property.

The Wealth Tax has again reared its ugly head; this was originally abolished in Spain on 1st January 2009. 16 September 2011, showed its reintroduction, following the new published law. They tell us that it will only be for a two-year period, 2012 and 2013, which corresponds to tax periods 2011 and 2012, respectively. This will ensure that the Government re-coup funds of over 1 Billion Euros. (Watch this space, as there have been temporary laws passed that remain in place for almost a decade)

The reason for this reintroduction is to “weather the financial storm which afflicts Spain at a time where those who own more have the moral obligation to contribute more to society following the legal principle enshrined by art 31 of Spain’s Constitution”.

Wealth tax legislation is down to the autonomous governments, who can either use the national law, or pass their own laws on the following:

1. Tax-free allowances

2. Deductions and tax rebates

3. Levied tax rate


Some regions, like Catalonia, Valencia, The Balearics, and Andalucía, pass their own laws. Others just use the national law. Now that the wealth tax has been re-introduced, some regions are expected to review their laws and the Canaries are no different...

Residents are subject to the laws of the autonomous regions where they live. Non-residents are always subject to the national law, regardless of which region they live in.

For residents, some regions apply a tax rebate of 100%, which means no wealth tax to be paid, whilst other regions apply no rebate, meaning the wealth tax must be paid in full. This inconsistency in laws leaves the door wide open for unforeseen changes.

Most Britons moving to Spain or buying property understand that they will have to pay Spanish taxes like income tax, capital gains tax and inheritance tax. Not everyone, however, is aware that Spain imposes an extra tax which is payable on top of the other Spanish taxes i.e. .The Wealth Tax in Spain.

Spanish Wealth Tax is payable by both residents and non-residents (if they own property in Spain), although the rules are different. Residents pay wealth tax on their worldwide assets but have quite generous tax-free allowances, whereas non-residents are only liable on net assets within Spain but miss out on some of the allowances.

Whether you are buying property as a holiday home or investment, don’t get caught out by rules you are not aware of. Always seek professional advice.

Sunway Tenerife has over 25 year’s experience, please call for more information about buying Tenerife Property as a Rental Investment. Sunway staff are able to offer you a wide and varied selection of property across the south of Tenerife as well as one of the most professional services on the island!