Buying Property in Spain: Tax Deductions

Income Tax Deductions Buying Property in the Canary Islands

Anyone who is going to be dealing with property in the Canary

Islands – be it to buy or rent – will be interested to know that

certain tax breaks are available subject to the various

qualification criteria as well as tax paid in the region.

As is the case in general with regard to taxation matters, there is quite a wide variation in the tax breaks available, with each autonomous community applying those deductions considered to be reasonable and beneficial according to the regional government.

Spanish Property Law

The regional level exemptions available in the Canary Islands were enacted by the parliament in Santa Cruz de Tenerife with the most important provisions contained in Decreto Legislativo 1/2009.

The most important deductions available are as follows:

Deductions for Investment in the Principal Personal Residence

In line with other regions in Spain, mortgage interest relief

is in the process of being phases out and is only now

available typically to those earning less than €24,107

Those who purchased their principal personal residence

before 01 January 2011 are unaffected by the changes and

may continue to benefit up to €9040 per annum

Deductions for Investment in the Principal Personal Residence cntd...

Those who have purchased a principal personal

residence after 01 January 2011 must earn less than

€17,707 in order to benefit fully from the deduction

Those who purchased their principal personal residence

after 01 January 2011 and who are earning between

€17,707 and €24,107 will benefit from a sliding scale

Deductions for Investment in the Principal Personal Residence cntd...

Where the purpose of investing in the property is

renovations to make it appropriate for a disabled person

then a deduction of 0.75% may be applied.

Deductions for Investment in the Principal Personal Residence cntd...

Unlike most of the other regions, the Canary Islands has

maintained a reduced level of deductions as follows:

I) Those earning < €12000 = 1.75%

II) Income > €12,000 and < €30,000 = 1.55%

III) Income > €30,000 and < €60,000 = 1.15%

These deductions may be applied post 2011

For renting of the principal personal residence

A taxpayer may deduct 15% of rental monies paid in

respect of their principal personal residence up to a value of

€500 annually on condition that:

1) They earned less than €20,000 individually or €30,000

jointly if more than one taxpayer

2) The rent paid exceeds 10% of their income that year.

For those with variable rate mortgages

Applies until 2012 and to those earning less than €30,000

individually or €43,000 jointly

The deduction is expressed as a percentage and is the

difference in the average rate of interest charged between

the current and previous years.

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