Gran canaria Buyers Guide
Ok, so you have made the decision and found the perfect home in the sun. Now what? How do you go from being just a sightseer to a Gran canaria property owner? Obviously some money has to exchange hands before the previous occupier is going to let you start bringing in your collection of Burt Bacharach LP’s and making yourself feel at home.
Buying a property – how does it work?
How much deposit needs to be put down to secure the purchase depends on the type of property you are looking to own. If it is a resale then generally 10% is requested up front, increasing to up to 25% if you are buying a new property direct from the builder. Contracts then need to be drawn up clarifying the who, what, when and hows of the agreement between both parties, such as the completion date and method of payment.
Before the deeds can be handed over however, all the receipts and necessary paperwork have to be checked to see that there are no debts outstanding on the property. This will include:
You'll need all the originals of these documents on the day of completion at the Notary's office. The notary will refuse to sign the deeds unless it has been clearly stated that you were already aware that some receipts were missing.
Taxes and Other Costs
In addition to the sales price, bear in mind that you, the purchaser, will also have to pay approximately 10% of the new declared value for a resale property, or approximately 6% if buying a new property. This is made up of the following taxes and fees;
Mortgages
You'll be pleased to hear it's fairly straightforward to apply for and obtain a mortgage and non-residents can get up to 60% of the valuation price. There are costs involved however:
Provided you submit the requested financial information, which is very straightforward, the mortgage can be effective within 10 to 15 working days. The advantages of securing a local mortgage include extremely low interest rates (4% variable, 5% fixed); it doesn't reflect your country of origin; it’s tax deductible; and should you rent the property, the same account can be used as a debit credit account.
The only downside is that local banks, whether they have major international associations or not, will only finance you a percentage of the valuation price, not of the actual purchase price. Therefore, depending on the evaluation, it’s sometimes worthwhile taking the time to compare what different banks will offer.
Frequently asked questions
What is a sales agreement?
A private document signed between the buyer and seller. It must state the following points:
What if there's still a mortgage on the property?
If there is a mortgage on the property it can be cancelled on the same day that you sign at the Notary. Before the signing date at the notary, we will inform the holding bank to prepare the cancellation costs, and the amount that the seller still owes.
On the day of the signing a banker's draft will be made out for this outstanding figure including the costs and paid to the bank. This figure will then be deducted from the purchase price when paying the seller. The bank will then register the cancellation of the mortgage.
Is it easy for a foreigner to obtain a mortgage?
Yes. So long as you can submit basic financial information getting a mortgage in Tenerife is much easier than in most other European countries. Often builders will offer you a mortgage if you purchase a new property. But don’t worry, we at Horizon will handle the whole process for you.
What does a foreigner need in order to buy a property
The first thing is to apply for an N.I.E. (Number of Identification for Foreigners), which is basically an ID card anybody with a financial interest in Spain or the Canary Islands is required to have. You'll also need to set up a non-resident bank account, which is a simple process, but again, we will handle all these administrative procedures for you.
Will we have to pay tax when selling a property?
Yes, as a non-resident you'll have to pay 5% of the new declared value as a retention to the Spanish Tax Office, but provided your accounts are in order you should get most of this back within five or six months. You will also have to pay 35% of the capital gains as Income Tax, i.e. 35% of the difference between the price you paid for the property and the price you’re selling it for.
Special incentives for companies investing in the Canaries
As more and more people each year are discovering the appeal of the Canary Islands, the tourism economy is shooting up at an unprecedented rate – great news for the financial stability of the region, and good news for the visitor as more money is consequently put back into improving the region's infrastructure and facilities.
However, as if the prospect of a booming population wasn't enough enticement to encourage new business to the archipelago, the Special Canary Islands Zone (ZEC) was established in the year 2000 to promote even further development by offering unique tax advantages to new companies establishing themselves within this zone.
However, as if the prospect of a booming population wasn't enough enticement to encourage new business to the archipelago, the Special Canary Islands Zone (ZEC) was established in the year 2000 to promote even further development by offering unique tax advantages to new companies establishing themselves within this zone.
There are certain criteria to be met before registering for ZEC status (ask us for more details) but ZEC companies will enjoy the following tax advantages:
As ZEC businesses are considered Spanish resident companies, EU tax treaties are fully applicable to avoid double taxation.
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