The PURCHASER of any estate must bear the following costs and taxes:
Impuesto sobre Transmisiones Patrimoniales (ITP) (Spanish Immovable Property Transfer Tax): This tax is charged to the purchase of second-hand estates (or subsequent sale). The rate applied in the Canary Islands amounts to the 6.5 percent of the value declared in the Purchase Deed.
Impuesto General Indirecto Canario (IGIC) (Value-Added Tax of the Canary Islands): This tax is only collected in the case that the property is sold for the first time (first sale carried out by the development company). The VAT applied in the Canary Islands amounts to the 7 percent of the value declared in the Purchase Deed.
Impuesto sobre Actos Jurídicos Documentados (AJD) (Spanish legal transaction tax): This tax or stamp duty is levied on those transactions which must be registered and whose value must be declared in “Public Instruments”, such as “Purchase Deeds” (Escritura de compraventa) or “Mortgage Deeds” (Escritura de hipoteca). The rate applied to this tax in the Canary Islands amounts to the 0.75 percent of the purchase value (for the “Purchase Deed” of a first-property) and the “Mortgage Liability” (for the “Mortgage Deed”).
Notary’s costs: The Notary’s fees to execute the Purchase Deed are based upon the value declared in the appropriate Purchase Deed.
Land Registry costs: This amount is similar to the Notary’s fees.
The SELLER of any property must bear the following costs and taxes:
Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana (Impuesto de Plusvalía) (Spanish Tax on the Increase in Value of Urban Properties (Capital Gain Tax)): This tax is levied on the increase in the property value from its purchase up to its sale. The amount payable is based on the property’s “cadastral value”. This is a percentage set by each municipality according to the years elapsed between the purchase and the sale of the property. The amount is rounded off by default. The period applied is, at least, one year and, at the most, twenty years). – Non-Resident Tax, in case of sale: In the case that the seller is a non-resident in the Canary Islands, the purchaser (either a resident or a non-resident) must withhold and pay the 3 percent of the purchase value to the Spanish Treasury (Tesoro Público). Such withholding is considered as a payment on account to the seller for the appropriate tax resulting from the gain arising from the transfer of the property.
All the costs for the cancellation of encumbrances and levies (e.g., mortgages, etc.)
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