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A legal Q & A
Selling your property in the Canary Islands may seem less complicated than when you are buying, but there are still some things you should take into account. Here we discuss the main legal issues you should be aware of as you sell your property privately.
Please keep in mind that while we do our best to ensure that this guide is as accurate as possible, it is intended for information purposes only. We cannot stress enough the importance of hiring a reputable local lawyer who speaks your language to look after your interests as you sell your Canary Islands property on the private market, and to provide you with the best and most up-to-date legal advice.
What taxes and fees will I have to pay when I sell my property in the Canary Islands?
When you sell your property in Spain, you are legally responsible for the payment of a municipal tax, called the Plusvalía, which is a Capital Gains Tax charged as a percentage of the increase in value of the land since the property was last sold. However, it is usually the custom in the Canary Islands that the buyer agrees to pay the Plusvalía tax.
As the seller, you are also liable for the required charges to cancel any encumbrances on your property, such as your mortgage. However, should the buyer choose to submit to your original mortgage (assuming your bank offers this option) then the buyer will be the one to pay the mortgage subrogation fees.
Finally, the seller is obliged to pay income tax on the income obtained from the sale of the property, which is the difference between the current and old sales prices less any expenses for maintenance or alterations to the property that can be justified by receipts.
Do any special regulations apply to non-residents who sell their Spanish property?
If you are not a Spanish resident when you sell your property in Spain, the buyer will be obliged to retain 5% of the selling price from you and pass this money on to the Spanish tax authorities. You will then have to present a Spanish tax declaration the following year, so that your tax liability can be assessed. After this is done you may be refunded a portion of the deposit money or possibly asked to pay the difference if your actual tax liability is more than the deposit.
This procedure was put in place by the Spanish government to prevent non-residents from leaving Spain without paying tax.
I’ve heard that many people under-declare the value of the sale. Why is that?
In the past, property sellers used to declare a sales price very much lower than the property’s market value, in order to pay less tax. However, the tax inspectors have since become more rigorous and can penalise you heavily if they feel that the amount you have declared is too low. It is important that you discuss this issue carefully with your lawyer when you are selling your property in Spain, to avoid possible complications that could arise later.