Practices and traditions

By Alan Nicholson, Director of Clear Blue Skies SL

Q I understand that under declaring the true value on title deeds is a common practice when buying property in Tenerife, is this correct and is it in my interest to do this?

A. Hmm, yes, in the past it was a common practice not to declare the true value, as this supposedly saved the buyer and seller some tax. Here, as in the UK, this practice is not legal, but often happened in both countries, however these practices are no longer extensively pursued.

Let’s deal with the tax position. If you do understate the value, you would save 6.5% of the difference between the declared value and the actual value of the transaction on a resale purchase, and 5.75% on a new property purchase. However when you come to sell, you will be levied 18% capital gains tax on that under declaration so clearly it is not really in the buyers interest. Additionally, if the tax authorities consider you have under declared, the buyer can be levied a fine, more tax and interest. However some sellers, when they bought years ago, paid a lot more than the price they actually declared, so they will try to get you to under declare.

My only suggestion is that if necessary to get the Tenerife property of your dreams, you could separate the furniture and fittings from the property purchase, but keep it to the minimum or you’ll pay later!

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