Mallorca property costs and taxes - Part I
REF. : C1994 - ALCUDIA
The costs of buying and owning a house in Mallorca
It is essential you are fully informed of all the possible costs and taxes involved, before buying a property in Mallorca, and unless you are planning to re-sell immediately, it is also important to have a good understanding of the on going costs of being a property owner in Mallorca.
Although you should be well supported by your real estate agency and your lawyer will take care of all the details, a personal knowledge of the real costs from the outset will help you make a better purchase and avoid unnecessary headaches and disappointments in the long run.
There are a number of costs and taxes, which you will have to pay when you buy property in Mallorca, on top of the price of the property. What and how much you pay will depend largely on the type of property you purchase.
Lawyer and estate agency fees are not regulated nor fixed so should be agreed on prior to purchase.
Fees and taxes on buying Mallorca property
As a general guideline calculate an additional 10-15% of additional fees and taxes, on top of the agreed purchase price. Once the final sales price has been agreed with the seller, an approximation of these additional fees and taxes can be calculated.
Additional fees and taxes include:
Property Transfer Tax or VAT - Depending on whether the property is a re-sale or new build and Stamp Duty.
Lawyer and legal fees. Generally between 0,5-1,5% of purchase price - This however is not binding and varies between law firms.
Property valuation (Tasador). This is only necessary if you are getting a mortgage.
Estate agency fees (often paid by the seller) - This is 7% on the price of the public deeds to be paid in Hacienda, in the regional government offices in Palma.
Notary fees, inscription into the land registry (Title deed tax and land registration fee) - 1-2,5 %
Understanding property tax in Mallorca
When buying property in Spain it is a good idea to get an estimate of the amount you will need to pay on top in taxes. The total amount will usually oscillate around the 10% of the purchase price and will be slightly higher for buying new properties than re sales.
The percentage is calculated on the market value or declared value of the property, which is usually slightly lower than the price you have agreed on. The tax authorities (Agencia Tributaria) can always reassess the value of your property for tax purposes and you can be taxed on the difference.
The buyer will pay most taxes. Except for land tax (plusvalía) and real estate agency fees. However if you don't draft it into the contract, you can end up paying all costs.
The Spanish tax year
The Spanish tax year runs from January 1st to December 31st.
If you spend more than 183 days a year in Mallorca (not necessarily consecutively), you are considered a resident for Spanish tax purposes and will have to submit a tax return before the end of June each year.
It is worth noting that taxes in the Balearics vary slightly from the Spanish mainland, so if you are familiar with the Spanish taxation system you may still need to double check that the same taxes and fees apply in Mallorca.
You are advised to seek the help of a professional financial adviser. As well as income, wealth and possible other national taxes (depending on circumstances), there are municipal taxes, otherwise known as IBI, and rubbish tax (basura).
3 Tiers of Government in Mallorca
Mallorca is the largest island and regional capital of the Balearics, an autonomous community in Spain. As such, when you purchase real estate in Mallorca you will be dealing with 3 separate governmental offices:
-The Municipality, i.e.: the town, in which the property is located
-The Regional government: The Balearic Islands
-The National government: Spain
It is essential that you determine your residency status in Spain. Fiscal residents in Spain pay taxes on their income worldwide, but non-residents are taxed only on their income within Spain.
Taxes for buying new builds in Mallorca
If you are buying a new residential property from a developer or a bank you will have to pay the following taxes:
VAT (IVA) and STAMP DUTY (Actos Jurídicos Documentados – AJD)
You will have to pay VAT (IVA) and STAMP DUTY (Actos Jurídicos Documentados – AJD) for new residential properties, never previously lived in, plots of land and commercial properties.
VAT (IVA) is a National Tax, the same all over Spain (with the exception of the Canary Islands).
VAT on new build properties in Spain is 10%.
Land, commercial properties and garage parking space are taxed up to 21%.
Stamp duty (AJD) is around 1% of the total price of the purchase, it varies from region to region.
The buyer pays VAT and Stamp Duty. If a deposit is paid before completion of the sale, said deposit is subject to VAT at the time the deposit is paid. There is no transfer tax to pay.