| Many
thanks to Tenerife Royale Estate Agents SL for helping explain here
some of the terms used when buying a business, in particular answering
one of the most commonly asked questions: What is a ‘Traspaso’?
The word means simply ‘transfer’, and buying a Traspaso
is one of the most common ways of setting up in business here in
Tenerife. When you buy a Traspaso, you buy not just a lease on
the premises, you get to own the fixtures and fittings, the equipment,
the stock (usually) and the goodwill. You get it all in one package
for a single sum. The only thing you don’t get to own are
the premises themselves. The premises remain the property of the
landlord who will provide your lease.
The lease: This is usually
a renewable five-year rental contract, sometimes longer. The
landlord may want you to take over the unexpired part of the
existing lease, but more often agrees to start a new one. You
will usually be asked to deposit the equivalent of two or three
month’s rent as a security deposit, refundable when
you leave. Rent is payable monthly in advance. The landlord is
allowed to increase the rent each year by the rate of the official
cost of living index (currently 2 %). While there’s no tax
payable on the amount you pay for the Traspaso itself, the rent
is subject to tax at 5%.
Fixtures, fittings and
equipment: as part of the sum you pay for the Traspaso, you get
ownership of everything on the premises, except for some items
provided free by suppliers – chill
cabinets, beer taps etc.
Stock: stock is usually, but not always, included in your purchase.
When you agree to buy and pay your deposit, you should agree on
the value of any stock to be included, and look for an adjustment
in price if the stock has been run down by the date you take over.
Goodwill: this is the current level of trade built up by the efforts
and reputation of the present owner. It means you have business
from day one and a base on which to build your own dream.
Paperwork: you should
not contemplate buying a Traspaso without sound, independent
advice. Your registration and transfer of ownership will be handled
routinely by your lawyer who will also do the necessary searches
and checks to ensure that you get your business free of any debts.
Expect to pay €1,200-1,600 for the work involved
in your Traspaso.
Timescale: from the day
you pay the deposit – which is usually
10% of the price – to the day you get the keys need be no
more than a month to six weeks.
If you are thinking of going in to business here, why not give
Tenerife Royale Estate Agents SL a call and ask for their Business
Section.
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