​ Tax Benefits Available through Investing in a Property in Tenerife

​  Tax Benefits Available through Investing in a Property in Tenerife
11 June

At DOM Tenerife Real Estate, we understand the importance of making informed decisions when it comes to property investments. One of the key factors that can influence your investment strategy is the array of tax benefits available through property investments in Tenerife. In this month's newsletter, we explore these benefits and how they can enhance the value of your investment.

1. Reduced VAT for New Properties

When you purchase a new property in Tenerife, you can benefit from a reduced VAT rate. Unlike mainland Spain, where the standard VAT rate is 21%, the Canary Islands enjoy a special reduced rate of 7% (IGIC - Impuesto General Indirecto Canario). This can significantly lower the initial cost of your property investment.

2. Deductions for Primary Residence

For residents of Spain, owning a primary residence in Tenerife can offer substantial tax deductions. These deductions apply to mortgage interest and principal payments. This benefit can reduce your taxable income, thus lowering your overall tax liability.

3. Capital Gains Tax Exemptions

If you sell your property in Tenerife, you may qualify for capital gains tax exemptions under certain conditions:

  • Primary Residence: If the property is your primary residence and you reinvest the proceeds into another primary residence within two years, you can be exempt from capital gains tax.
  • Retirees: Residents over 65 years old who have lived in the property for at least three years are exempt from capital gains tax on the sale.

4. Wealth Tax Benefits

The Canary Islands offer favorable wealth tax conditions compared to other regions in Spain. Property owners can benefit from higher exemptions and lower tax rates. This is particularly advantageous for high-net-worth individuals looking to optimize their tax obligations.

5. Depreciation Allowances

Investors can take advantage of depreciation allowances on rental properties. The Spanish tax system allows for annual depreciation of up to 3% of the property's purchase price (excluding land value). This deduction can be applied to your rental income, effectively reducing your taxable rental income.

6. Inheritance and Gift Tax Reductions

Tenerife offers generous reductions on inheritance and gift taxes for residents. Direct descendants, such as children and grandchildren, can benefit from reductions of up to 99.9%, making property succession more tax-efficient for your heirs.

7. Non-Resident Income Tax Reductions

Non-residents who own property in Tenerife and earn rental income can benefit from reduced tax rates. The standard non-resident income tax rate of 24% can be reduced to 19% for residents of EU/EEA countries.

Maximizing Your Investment

To fully leverage these tax benefits, it is crucial to plan your investment strategically and stay informed about the latest tax regulations. At DOM Tenerife Real Estate, we are committed to providing you with up-to-date information and expert advice to help you make the most of your property investments.

Contact Us

For personalized advice and more information on how to benefit from these tax advantages, please feel free to contact our team. We are here to help you navigate the real estate market in Tenerife and optimize your investment portfolio.

DOM Tenerife Real Estate Email: Phone: +34 922 089 199

Thank you for choosing DOM Tenerife Real Estate. We look forward to assisting you in your investment journey.

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