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Property Buyers Guide To The Canary Islands

BUYING A PROPERTY IN CANARY ISLANDS

Have you been dreaming of leaving everything behind or just buying a holiday home? So you've found a property that you want? So what do you do now - please read this guide to buying your property in Canary Islands.

Purchasing Procedures

Usually a 10% deposit is requested on resale property and 10 to 25% when buying directly from the builder on a new property.
Contracts are immediately drawn up and the document will include the completion date and forms of payment.
The agency or solicitor is responsible for gathering up-to-date receipts and ensuring that there are no outstanding debts on the property.

Nota Simple (clearing data from the registration office)
I.B.I (Local council rates)
Electricity, Water receipts up-to-date Community receipt up-to-date signed and approved by the President of the community of owners
(Escritura) Copy of the title deeds

Without the originals of these documents on the day of completion a Notary will not sign the deeds - unless it is clearly stated that you were aware that certain receipts were missing.

NB. : Should there be a mortgage on the property, it can be cancelled and registered as such on the same day that you sign at the Notary.

Taxes & Legal Expenses (in addition to the sales price)

A 10% additional charge on top of the cost of the property is required. If it's a new property this will come down to approx. 7%.

This includes:.

RESALE property only: 6% (Impuesto sobre Tramisiones Patrimoniales y Actos Juridicos Documentados - Mod. 600) (Equivalent of VAT).
NEW property only: 5% (I.G.I.C.) and 0.05% of Mod.600
Notary Fees. (approx, 0.75%)
Property Registration Office. (approx. 0.5%)
Plus Valia (Added value).

If you buy in the name of a company you are liable to pay l. G. I. C

FINANCING MORTGAGES

Non-residents can get up to 60% of the evaluation price. Mortgages are fairly easy to apply for and obtain.

a) Costs involved:

• Evaluation will cost approximately € 300
• 1 % mortgage opening commission.
• Insurance will vary from € 150 - 300 per annum
• Notary & Registration of the mortgage.

b) Advantages:

Your bank will require some basic financial information - this is the same for everyone, regardless of their country of origin. Provided you submit this, a mortgage can be set up in as little as 10 to 15 working days.
Should you decide to rent the property, the same account can be used as a debit credit account.
Extremely low interest rates: 4.0% Variable, 5.0% Fixed.
Tax deductible.

c) Disadvantages:

Local banks (even international ones) will finance you a percentage of the evaluation price - not of the real selling price. As the evaluation is sometimes higher than the buying price it is advisable to make a small comparative study with what your bank offers you.

FREQUENTLY ASKED QUESTIONS:

What is a sales agreement?:
This is a private document signed between the buyer and seller. It must reflect the true ownership of the property, its legal definition, the exact form of payment (bankers draft, cash...), the currency of the transaction ( Euros, Pounds, Dollars etc.), completion dates and penalty clauses. In general, if the buyer withdraws he is liable to pay double the amount of the deposit.

FISCAL ADVANTAGES IN THE CANARY ISLANDS FOR PRIVATE OR PROFESSIONAL INVESTMENTS.

The Canary Islands are categorised as the Z.E.C (Zona Especial Canarias) by the European Union, which makes them a low taxation zone with only 5% I.G.I.C (equivalent to VAT) and 18% on capital gains. Buying in the name of a company will exempt you from the latter.

The R.LC (Reservas de Inversiones Canarias), stipulates that companies will only be taxed on 10% of their profits if they re¬invest 90% in Canarian territory within a period of three years. As such it is not surprising that we have been witnessing spectacular economic growth in the last few years as more and more multinational offshore companies have been establishing themselves in the islands.

What happens if there is a mortgage on the property?

Most people panic when they hear that there is a mortgage on a property. Before signing the deeds at the notary's office your agent will have to inform the holding bank to prepare the mortgage cancellation costs and the total amount due from the seller. On the day of the signing you will be asked to prepare a banker's draft for the bank for the amount due and the rest for the seller. It is then the bank's responsibility to register the cancellation of the mortgage.

Is it easy for a foreigner to obtain mortgage?.

Yes. Provided you can submit them with basic financial information getting a mortgage here is much easier than in most European countries. The maximum amount you will be able to get is 50% of the evaluation of the desired properties. Agents often handle all the process from beginning to end. Often builders will offer you a mortgage if you purchase a property.

What must a foreigner do in order to purchase in the Canary Islands?.

A N.I.E (Number of Identification for Foreigners) is required which is something similar to your ID in the Canary Islands - and a Non Resident bank account. Again, most agents will handle all these administrative procedures for you.

When we sell the property do we have to pay tax?

a) 5% retention(on the new declared value) from the Public Treasurer (Ministry of Economy). This is done in case you have any public or private debts. Provided you have your accounts up to date, you will get most of it back after 5 or 6 months, through your fiscal representative.

b) Capital Gains - this must be discussed with you financial representative. The Capital Gains tax is set at 18%.

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