All property purchases and sales attract tax liabilities. If you are a non-resident and purchasing property in Mallorca you will need a NIE (Personal Tax Identification Number).

If this is your first purchase, we can help you apply for your NIE or it will be arranged by your Spanish lawyer and can take up to 4 weeks. Obtaining an NIE number does not affect your tax status in the UK.

Finance

If a mortgage is required this can be most easily obtained here. The banks in Mallorca will loan usually up to 70% of the purchase price to a non-resident and up to 80% to a resident. We can assist you to find the bank which will make you the best offer.

The bank will request a professional independent valuation to be carried out to support the loan application and to confirm to the bank that this property is suitable for lending. The fee for this is around 700 Euro and is paid in advance. A search is also made in the Land Register and an official certificate of the corresponding entry to check it is clear of any existing debts or mortgages.

Bank charges vary little between banks and include an opening commission (normally 1% of the loan) and lesser amounts for notary, bank gestoria and land register. So you should allow approximately 1.5% of the purchase price to cover mortgage expenses.

The bank will also recommend that you take out buildings insurance with them.

Spanish banks normally take approximately 4 weeks to confirm their offer and a further 3 weeks to organise the loan itself.

As a purchaser you will be required to provide a letter from your UK bank to confirm that you are a good customer, provide copies of P60 or latest filed tax returns and recent bank statements.

All our local bank managers speak English.

Lawyers

If you decide to use one, we will recommend a professional and friendly English speaking Spanish lawyer, Abogado.

Purchases are usually much quicker than in the UK. One of the reasons is that there is no local authority search as in the UK. Your Lawyer, Abogado, will conduct a land registry search which will confirm ownership and highlight any outstanding mortgages or encumbrances. This takes approximately 2 days.

A private ‘option to purchase’ contract is usually drawn up by the Purchaser’s lawyer within 3 to 4 days of the agreement to purchase. There is no standard contract, each lawyer prepares his own and these must be checked carefully. A useful point is to check the final completion date, as this must be agreed by both parties before the contract is signed.

The deposit is usually paid directly to the owners on signing the ‘option to purchase’ contract.

Purchases normally complete in approximately 6/8 weeks.

Taxes

Selling property in Spain attracts Capital Gains Tax at a rate of 18% for non-residents. We can make this calculation for you. It is paid on the difference between the price on your deed when you bought the property and the new sales price. For non-residents it is paid in two stages – you pay a contribution towards your tax of 3% of the sales price on the day of completion and the balance of the tax is paid when requested by the Government tax department, which can be anytime up to 5 years after completion. Residents can avoid the tax when you sell your main residence and put all the profit towards your next home within 2 years. Alternatively, you will be asked for the 21% tax to be paid with your tax return 2 years after sale.

Pensioners who are resident here are exempt from tax if the property is your main residence.

Buying property in Spain attracts I T P, which is purchase transfer tax of 7% (equivalent of stamp duty). It makes up the majority of the 10% of costs that you allow for any property purchase in Spain.

VAT for commercial properties, parking spaces or purchases of building plots from a corporation or property developer will be assessed at the standard vat rate of 18%.

‘Plus valia’ Municipal Tax is a local authority increased land value tax. It must be paid by the seller as required under Spanish law and is the tax liability on the increased value of the land since last purchased. The calculation will be made by the local council and does not normally add up to a great sum (it increases depending on the number of years you have owned the property).

Title Deeds - Escritura

A new Escritura will be drawn up by the Notary, Notario. The existing owner/s will have to sign although giving power of attorney to their lawyer is common practice.