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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 50% of the purchase price to a non-resident and up to 70% 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 1500 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 a similar percentage (1%) for notary, bank gestoria and land register. So you should allow approximately 2% 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 copies of your P60, tax returns, recent bank statements and a credit check report.
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 owner´s lawyer 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 21% for non-residents. 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 tax to be paid with your tax return in the first year after the sale.
Profit tax for residents is as follows:
EU Citizens: 19.5%
Non-EU Citizens: 21%
Profit tax on Spanish companies is based on 35%.
Pensioners who are resident here are exempt from tax if the property is your main residence.
Buying property in Mallorca attracts I T P, which is Property Transfer Tax, payable by the buyer to the government when you purchase in the Balearic Islands. The tax amount is graded according to the purchase price and is between 8-11.5% of the purchase price.
This excludes newly-constructed properties bought from the developer on which I.V.A (VAT) is applied in place of the Property Transfer Tax. It is applied at a rate lower than the standard I.V.A. and currently is set at 10% plus 1.2% stamp duty.
The ITP or IVA makes up the majority of the 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 21% plus 1.2% Stamp Duty.
´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 increases depending on the number of years you have owned the property. In October 2021 the European Court ruled that the method for calculating Plusvalia was unconstitutional. Since November 2021 the method of calculating this tax by the local authority in Calvia has changed. Taxpayers can choose between two formulas for calculating the tax base: The first takes into account the cadastral value, to which new coefficients are applied, and the second determines the plusvalia by calculating the difference between the acquisition value and the transfer value applying a percentage to this result.
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.
N.B. to all buyers. It is important to note that all outstanding utility charges pass with the property. We or your lawyer will handle this, however it is important to ensure that this covers all of the services provided to the property and that the information obtained is correct and up to date.
A guide to the likely costs/fees applicable
As a general rule it is recommended that the purchaser assumes that the additional costs to cover all tax liabilities and fees are between 10-12% of the purchase price. The following guide is not completely precise however it will provide a reasonable indication of how the fees are made up:
10% VAT plus 1.2% Stamp duty - New Property (only)
8 - 11% ITP Transfer Tax - Resale Property (only)
21% VAT plus 1.2% Stamp duty - Commercial purchase/company purchase (only)
2-3% - all properties for notary fees, legal fees, property registry (land) and bank arrangement fees.
Who pays what between seller and buyer?
Spanish Law states that unless stipulated in the Contract, taxes and fees are split between the buyer and the seller as follows:
The Buyer pays: The purchase tax or IVA, Registration fees, bank mortgage fees and Notary costs
The Seller pays: The estate agents fees, capital gains tax, the ‘plus valia’ tax and bank and registry charges to cancel an existing mortgage.
Ongoing expenses
A prospective purchaser should take into account that there will be regular expenses affecting the property itself. These include:
Community charges:
Although all properties sold in Mallorca are freehold, a purchaser will automatically become a member of the Community of Owners when the property is part of a development complex with shared facilities such as a swimming pool, gardens, parking spaces, roads and lighting to maintain. Community charges are usually paid in advance by direct debit and owners are required to attend annual meetings at the complex to discuss costs and vote in a new President and Owners Committee. Each complex has a separate administration company which manages the complex on behalf of the owners. Owners are expected to know and comply with community regulations and statutes.
Refuse collection and council tax (Impuesto sobre Bienes Inmuebles or IBI) will be charged annually by the Local Authority based on the ‘catastral value’ or as we would call it, property value for council tax purposes.
Gas, water, electricity, telephone etc.
A prospective purchaser should always check that the vendor is up-to-date with all payments affecting the property and its services.
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