Property Taxes in Tenerife (Canary Islands)

Once you understand the steps in a transaction, the next thing worth knowing is exactly how much you’ll pay, and that figure depends on where you’re buying more than most people expect.

If you’re buying

If you’re buying a resale home in Tenerife, you’ll pay ITP, the property transfer tax, at 6.5% of the purchase price. If you’re buying new-build directly from a developer instead, the tax changes to IGIC, the Canary Islands’ equivalent of VAT, at 7%, plus a tax on legal documentation (AJD), usually 1%. The buyer also covers notary fees and property registry costs, typically another 1-1.5% combined.

For example, on a new-build purchase of €250,000: IGIC at 7% comes to €17,500, plus AJD at 1% (€2,500), plus notary and registration, roughly another €3,000-3,500. Total additional costs usually land around 9-10% on top of the property price, worth budgeting for from the start.

ITP must be paid within 30 working days of signing at the notary, a legal deadline worth keeping in mind from day one.

If you’re selling

If you’re selling, the tax that matters is capital gains, calculated as the difference between the purchase and sale price, minus allowable costs. Non-residents pay a flat rate of 19%, and a retention system applies: the buyer withholds 3% of the sale price to ensure the tax gets paid. That withheld amount is declared via Modelo 210 within a month of the sale. If the 19% tax on actual profit is lower than that 3% retention, the seller can request a refund of the difference.

For Spanish tax residents, the calculation works differently, filed through the annual tax return, on a progressive scale:

• 19% up to €6,000
• 21% from €6,000 to €50,000
• 23% from €50,000 to €200,000
• 27% from €200,000 to €300,000
• 28% or 30% above that threshold

For example, a resident sells a property with a €60,000 profit. The first €6,000 is taxed at 19%, the next €44,000 at 21%, and the remaining €10,000 at 23%. Tax is calculated per bracket, not on the whole amount at once, so the effective rate usually ends up lower than it first appears.

Worth remembering separately: the municipal plusvalía tax, a local tax on land value increase that’s often overlooked, calculated by the town hall based on cadastral value growth over the ownership period.

Reduced purchase tax rate

A reduced rate (tipo reducido) of 5% applies when all of these conditions are met:

• The property becomes the buyer’s primary residence
• The price is €200,000 or less
• It’s the buyer’s first home, or they sell their previous one within 2 years

An additional bonificación of 20% off that 5% applies if these are also met:

• It’s the buyer’s first and primary home
• The buyer is 40 or under
• Combined annual income doesn’t exceed €46,455 (plus €6,825 per dependent)
• Or the buyer is a woman who has experienced gender-based violence

For example, a buyer purchases an apartment for €165,000, which will become their first and only primary residence. They meet every requirement: the price is under €200,000, they’re 32, and their income falls within the limit.

First, the reduced 5% rate applies: €165,000 × 5% = €8,250. Since they also qualify for the bonificación, an additional 20% discount applies: €8,250 × 20% = €1,650.

Final tax owed: €8,250 – €1,650 = €6,600.

By comparison, at the standard 6.5% rate: €165,000 × 6.5% = €10,725.

The difference between the standard and reduced rate comes to €4,125, a meaningful sum that’s easy to miss without checking the requirements beforehand.

Worth flagging: if the reduced rate is applied incorrectly, tax authorities can later demand the difference up to the full 6.5%, plus late payment interest, so it’s worth confirming eligibility before the purchase, not after.

None of this needs to be memorized. It just needs to be accounted for in advance, ideally with proper advice, so the amount due at the notary isn’t a surprise.

Once you understand the steps in a transaction, the next thing worth knowing is exactly how much you’ll pay, and that figure depends on where you’re buying more than most people expect.

If you’re buying

If you’re buying a resale home in Tenerife, you’ll pay ITP, the property transfer tax, at 6.5% of the purchase price. If you’re buying new-build directly from a developer instead, the tax changes to IGIC, the Canary Islands’ equivalent of VAT, at 7%, plus a tax on legal documentation (AJD), usually 1%. The buyer also covers notary fees and property registry costs, typically another 1-1.5% combined.

For example, on a new-build purchase of €250,000: IGIC at 7% comes to €17,500, plus AJD at 1% (€2,500), plus notary and registration, roughly another €3,000-3,500. Total additional costs usually land around 9-10% on top of the property price, worth budgeting for from the start.

ITP must be paid within 30 working days of signing at the notary, a legal deadline worth keeping in mind from day one.

If you’re selling

If you’re selling, the tax that matters is capital gains, calculated as the difference between the purchase and sale price, minus allowable costs. Non-residents pay a flat rate of 19%, and a retention system applies: the buyer withholds 3% of the sale price to ensure the tax gets paid. That withheld amount is declared via Modelo 210 within a month of the sale. If the 19% tax on actual profit is lower than that 3% retention, the seller can request a refund of the difference.

For Spanish tax residents, the calculation works differently, filed through the annual tax return, on a progressive scale:

• 19% up to €6,000
• 21% from €6,000 to €50,000
• 23% from €50,000 to €200,000
• 27% from €200,000 to €300,000
• 28% or 30% above that threshold

For example, a resident sells a property with a €60,000 profit. The first €6,000 is taxed at 19%, the next €44,000 at 21%, and the remaining €10,000 at 23%. Tax is calculated per bracket, not on the whole amount at once, so the effective rate usually ends up lower than it first appears.

Worth remembering separately: the municipal plusvalía tax, a local tax on land value increase that’s often overlooked, calculated by the town hall based on cadastral value growth over the ownership period.

Reduced purchase tax rate

A reduced rate (tipo reducido) of 5% applies when all of these conditions are met:

• The property becomes the buyer’s primary residence
• The price is €200,000 or less
• It’s the buyer’s first home, or they sell their previous one within 2 years

An additional bonificación of 20% off that 5% applies if these are also met:

• It’s the buyer’s first and primary home
• The buyer is 40 or under
• Combined annual income doesn’t exceed €46,455 (plus €6,825 per dependent)
• Or the buyer is a woman who has experienced gender-based violence

For example, a buyer purchases an apartment for €165,000, which will become their first and only primary residence. They meet every requirement: the price is under €200,000, they’re 32, and their income falls within the limit.

First, the reduced 5% rate applies: €165,000 × 5% = €8,250. Since they also qualify for the bonificación, an additional 20% discount applies: €8,250 × 20% = €1,650.

Final tax owed: €8,250 – €1,650 = €6,600.

By comparison, at the standard 6.5% rate: €165,000 × 6.5% = €10,725.

The difference between the standard and reduced rate comes to €4,125, a meaningful sum that’s easy to miss without checking the requirements beforehand.

Worth flagging: if the reduced rate is applied incorrectly, tax authorities can later demand the difference up to the full 6.5%, plus late payment interest, so it’s worth confirming eligibility before the purchase, not after.

None of this needs to be memorized. It just needs to be accounted for in advance, ideally with proper advice, so the amount due at the notary isn’t a surprise.