Property Sales Tax Payable in the Canary Islands
Property Sales Tax Payable in the Canary Islands This presentation has been updated and is valid for 2019. * *Advocate Abroad does not accept responsibility for losses of any type consequent upon reliance on the information contained in this presentation. Please consult a lawyer before acting. 2
Property Sales Tax Payable in Spain ● All new properties in the Canary Islands attract IGIC tax (equivalent to VAT) ● Secondhand properties are subject to ITP (Impuesto de Transmisiones Patrimoniales) 3
Property Sales Tax Payable in Spain ● Both IGIC and ITP taxes are set by the Canary Islands regional government. ● The rate of IGIC (VAT) tax payable on new build properties is 7% ● The rate of ITP tax payable on second-hand properties is 6. 5% 4
Repossessed Properties • If the property was repossessed, and then purchased at public auction, the rate of ITP tax payable is 7% • This rate reduces to 3% if the property is bought as the main family home and its value does not exceed € 150, 000 5
Protected or Social Housing Where the property being purchased is subsidised by the government then no ITP tax is levied if the property is going to constitute the main home of the purchaser. 6
Initiatives for Large Families A property acquired by a legally defined 'large' family for the purpose of being their main home is subject to a special tax rate of 1% where: ● the property is purchased within 2 years of the family achieving the status of being 'large' 7
Initiatives for Large Families ● the property formerly used as a family home must be sold within the same period of time ● the total taxable income of the family unit may not exceed € 30, 000 with the limit increasing € 12, 000 for each child in excess of the number required for 'large' family qualification 8
Purchase of Housing by the Disabled The acquisition of a property as a main home by a person suffering a disability of > 65% or by any person who may avail of income tax reductions to care for that person, shall attract a rate of tax of 1%, where: 9
Purchase of Housing by the Disabled ● the total taxable income of the purchasers does not exceed € 40, 000 with an additional € 6, 000 for each person for whom the care allowance deduction can be applied ● that any property that previously was the main family home be sold within two years of the purchase of the new home 10
Purchase of Housing by single parent families • The acquisition of a property as a main home by a single parent earning up to € 24, 000 per annum, shall attract a rate of tax of 1% • Qualifying applicants may earn an additional € 6000 per member of the family that gives rise to this deduction • Any previous main family home must be sold within a maximum period of 2 years from the purchase of the new home 11
Main Home Purchase The purchase of a property is subject to a tax rate of 5% if the property is going to constitute the main home of the purchaser where the value of the property does not exceed € 150, 000. Any previous home must be sold within a period of 2 years. 12
Rebates on First Home Purchase 20% of any ITP tax paid as a result of the purchase of a property shall be returned where the property is the purchaser’s first property purchase: ● the purchaser is under 35 years of age ● the value of the property does not exceed € 150, 000 ● the purchaser’s taxable income does not exceed € 24, 000, increasing in € 6000 per member of the family, or ● If the purchaser is a victim of domestic violence 13
Tax on Options to Purchase Property ITP tax of 1% of the value of the property is payable on formal options to purchase This rate reduces to 0 if the property is to be the main family home and the value does not exceed € 150, 000 14
AJD Tax on Property A tax known as ‘Actos Jurídicos Documentados’ (Documented Legal Operations Tax) is also payable on property transactions. There are two types – a fixed rate and a variable rate (variable in that it is a tax set by regional parliament and so varies according to region). 15
AJD Tax in the Canary Islands The fixed rate is relatively minor, being fixed at a set amount per document needed to set-up the transfer: for example, 0. 30€ per page. On the other hand, the variable rate is set as a percentage of the appropriate value – in the Canary Islands this is 0. 75%. 16
AJD Tax in the Canary Islands– New Build Properties If buying a new-build property in the Canary Islands, in addition to the VAT paid (@7%) the purchase must pay the fixed rate as well as the variable rate (@0. 75%). 17
AJD Tax in the Canary Islands – Resale Properties If buying a resale property in the Canary Islands, in addition to the ITP paid (@6. 5%) the purchaser must pay only the fixed rate of AJD. 18
AJD Tax on Mortgages The variable rate of AJD tax is also payable on any mortgage that is created in order to finance the purchase of either a new build or secondhand property. 19
AJD Tax on Mortgages As a result of a recent change to the relevant legislation, the AJD tax on a mortgage is payable by the bank and not the borrower. (It remains to be seen, but it is likely the banks will in future seek to recoup these costs by increasing their mortgage arrangement fees). 20
Reduced Rates of AJD Tax • Protected/Social Housing: AJD tax is reduced to 0. 4% • First Home Purchase – There is also a reduction in the tax rate of AJD to 0. 4% if property acquired by a 1 st time purchaser • Large Families & Disabled Purchasers: 0. 4% rate applies 21
For more information or assistance with legal or tax matters from our network of local English-speaking Property lawyers in the Canary Islands 22
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