Do You Want to Buy a Property in the Canary Islands?

Do You Want to Buy a Property in the Canary Islands? What Taxes Would You Pay?

Most of the time, purchasing a home represents a major financial outlay, and for the vast majority of people, it also requires obtaining mortgage financing. (Check our Blog to learn how to get 100% financing + expenses).

Not only do you need to have savings to cover the difference between the purchase price and what the bank will finance (around 20%, since most banks usually lend about 80%), but you’ll also need approximately 10% of the purchase price to cover additional expenses and taxes.
Although the exact percentage may vary depending on the region, here in this blog we’ll focus on the taxes you’ll pay when buying a property in the Canary Islands.

That’s why it’s so important to have professional advice and be guided throughout the entire process by a team of experienced real estate professionals.

What Taxes and Expenses Does a Home Buyer Pay in the Canary Islands?

First, it’s important to clarify that buying a new property is not the same as buying a resale property, and it also makes a difference whether you’re purchasing with or without financing.
These two factors determine which taxes apply when purchasing a property in the Canary Islands.

IGIC (Canary Islands General Indirect Tax)

For those unfamiliar with it, IGIC is the Canary Islands’ version of VAT, applied at a general rate of 7%, although lower rates may apply in certain cases or for specific products.
IGIC is paid when purchasing a new (never-before-owned) property.

There is a reduced rate of 5% for the purchase of a primary residence if the taxable base is €150,000 or less (higher limits apply for large families), and the buyer does not already own or hold usufruct of another home.
If the buyer meets these conditions and any of the following criteria, the IGIC rate is further reduced to 3%:

– Be 35 years old or younger.
– Be a member of a large family.
– Have a disability equal to or greater than 65%.
– Be a woman who is a victim of gender-based violence (with a valid protection order or court ruling).
– Be a single-parent family.
– Have a household income (in the previous tax year) of up to €24,000, plus €10,000 if filing jointly.

In specific situations, a 0% IGIC rate applies—usually for the purchase of publicly promoted or subsidized housing (VPO), including garages and annexes within the same building (limited to one parking space).
This 0% rate may also apply to properties acquired by entities dedicated to residential rentals.

Property Transfer Tax (ITP)

If you’re buying a resale property in the Canary Islands, you’ll pay the Property Transfer and Stamp Duty Tax (ITP and AJD) instead of IGIC.
These taxes are managed by the regional governments, and in the Canary Islands, the general rate is 6.5% of the property’s value.

However, a reduced rate of 5% applies in the following cases:

– When the property will be used as the buyer’s main residence.
– When the taxable base (including garages and annexes sold together in the same building) is €150,000 or less.
– When, at the time of purchase, the buyer does not own, co-own, or hold usufruct of another property. If they do, they must sell it within two years via a public deed.

There is also a 1% reduced rate in certain cases for large families, people with disabilities, and single-parent families with low income.

Stamp Duty (AJD)

The Stamp Duty Tax (AJD) consists of a fixed and a variable component. Depending on the case, you may have to pay both, or only one:

– New property: Both fixed and variable parts apply, whether or not the purchase is financed with a mortgage.
– Resale property:
– If purchased without financing, only the fixed AJD applies.
– If financed with a mortgage, the variable AJD also applies, though this cost is typically covered by the bank.

The fixed AJD fee corresponds to the stamped paper used for notarized documents, and it is the same across Spain: €0.30 per sheet and €0.15 per page.

The variable AJD rate is generally 0.75%, but a reduced rate of 0.40% applies to first copies of deeds documenting the purchase of a main residence or mortgage loans used to finance it—provided the buyer meets the eligibility criteria set out in Decree-Law 1/2009 of April 21, which governs regional taxes in the Canary Islands.

Other Expenses to Consider

The taxes and fees mentioned above are usually the most significant costs for the buyer in a property transaction.
However, there are other expenses to consider, such as notary fees, land registry costs, and administrative (gestoría) fees.

You should also take into account the mortgage-related expenses, which are generally paid by the bank.
Still, you’ll need to pay for the property appraisal and possibly a mortgage arrangement fee, which usually does not exceed 2%