Who can purchase Real Estate in the Canary Islands

We often come across clients who are unsure whether everyone can purchase real estate in the Canary Islands. In this article we cover crucial topics and frequently asked questions, related to the purchase of real estate in the Canary Islands, and in Spain in general.

The irrelevance of citizenship and residency for purchasing real estate in the Canary Islands

Everyone can invest in real estate in Canary Islands regardless of their citizenship or place of residence. Nevertheless, if the plan is to stay in Spain, the applicant’s citizenship would determine whether a residence permit would be required. EU citizens do not require a residence permit in any case, while non-EU citizens do require one if the stay in Spain exceeds 3 months.

From an immigration point of view, the only requirement for the investor to purchase real estate in Spain is to obtain a Spanish Foreign Identity Number (NIE). If the investor is an EU citizen and wants to stay in Spain for a period exceeding 3 months, he/she would only need to register his/her residence and obtain an EU citizen Registration Certificate.

Having extensive expertise in immigration law, we, at ECOVIS Legal Spain – Canary Islands offer our clients customised legal advice and assistance with immigration processes. 

Is a Spanish Bank Account needed?

Although having a Spanish bank account is not set out as a mandatory requirement, in practice, it is necessary or at least advisable to have one to pay for utilities, expenses and tax. Besides, the possibility for non-residents to open a bank account in Spain means that most foreigner investors eventually open one.  

We, at ECOVIS Legal Spain – Canary Islands offer our clients the possibility to assist them and liaise with local banks to open a resident- and non-resident bank account.

The possibility of applying for a mortgage by a non-resident

It is possible for non-residents to apply for a mortgage in Spain. To compensate a higher risk of non-repayment, Spanish banks generally request a higher downpayment to non-residents (generally 30%) and offer a shorter repayment period (generally 20 years).

We, at ECOVIS Legal Spain – Canary Islands assist our clients with the search of mortgages and offer them to liaise with the bank during the entire application process.

Real Estate Purchase Tax for non-residents

In Spain, the purchase of real estate can be taxed either through ITP tax or IVA tax (IGIC tax in the Canary Islands), depending on whether the property is a new construction (IVA or IGIC) or not (ITP). In addition to the purchase tax, a lower tax (AJD) is imposed on the notarial deeds and mercantile and administrative documents.

While the tax rate of both ITP and IVA (mainland Spain) or IGIC (Canary Islands) is the same for residents and non-residents, it does differ according to the location of the property.

The standard IVA rate in mainland Spain is 10% while Canary IGIC standard rate is 7 %. On the other hand, while ITP ranges between 8% and 11% in most coastal regions in Spain (Mallorca, Ibiza, Barcelona, Girona, Valencia, Alicante etc.), ITP general rate is set at 6.5% in the Canary Islands.

We, at ECOVIS Legal Spain – Canary Islands offer our clients customised tax advice as well as assistance for the payment of taxes involved in the purchase of real estate.

Other unavoidable expenses

Apart from taxes, the investor is required to pay purchase notarial deeds and Land Registry fees for property registration.

If you are considering purchasing real estate in the Canary Islands, ECOVIS Legal Spain – Canary Islands can happily provide you with customised legal advice and will help you find the right property through reputable estate agents we work closely with. For direct enquiries you can contact us here or directly at [email protected].

Photo credit: Maria Ziegler