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Spain property - Legal FAQs
Costs of Buying Property in Spain: Spotlight on Mallorca and the Balearics
Understanding Property Taxes and Costs in Spain
When buying property in Spain, there are several costs and taxes to consider, whether you’re purchasing a brand-new home or a pre-owned property. These expenses go beyond the property’s purchase price and are essential for completing the transaction legally and smoothly. While the specific rates may vary across Spain’s regions, the structure of these taxes generally remains consistent.
Key Taxes and Fees in Spain
VAT (IVA): For new properties, a flat 10% VAT is applied, regardless of the purchase price. This rate is consistent throughout Spain, offering simplicity in calculations.
Transfer Tax (ITP): For pre-owned properties, a tiered tax structure is used. The percentage depends on the property’s value and the region, with rates typically ranging from 6% to 10%.
Stamp Duty (Actos Jurídicos Documentados – AJD): This tax, payable on new builds, is calculated at a rate between 0.5% and 2%, depending on the region.
Notary and Land Registry Fees: These are regulated and depend on the property’s price, typically ranging from €600 to €2,000.
Legal and Administrative Fees: Hiring a solicitor or gestor is highly recommended to handle paperwork and ensure compliance. Fees usually range between 1% and 2% of the property’s value.
Surveyor Costs: For buyers requiring a mortgage, a property valuation by a surveyor is mandatory. This service typically costs between €250 and €600, depending on the property’s value and location.
Optional Services: Engaging a gestor to handle tax filings and administrative paperwork can cost around €300, offering peace of mind during the process.
Property Taxes Specific to Mallorca and the Balearics
The Balearic Islands, including Mallorca, have their own specific tax rates and regulations. Understanding these will help you budget accurately when purchasing property in the region.
Taxes for New Builds
For new homes in Mallorca:
VAT (IVA): A flat rate of 10% applies.
Stamp Duty (AJD): The standard rate in Mallorca is 1.5%, but this increases to 2% for properties valued over €1,000,000.
Taxes for Pre-Owned Properties
For existing homes, the Transfer Tax (ITP) follows a tiered system:
8% for the first €400,000 of the property’s value.
9% for the amount from €400,001 and €600,000.
10% for the amount from €600,001 and €1,000,000.
12% for the amount from €1,000,001 and €2,000,000.
13% for amounts over €2,000,001.
This scalable structure ensures that higher-value properties incur proportionally more tax.
Example Calculations for Buying Property in Mallorca
Example 1: Buying a New Home (€500,000)
VAT (10%): €50,000
Stamp Duty (1.5%): €7,500
Notary and Land Registry Fees: Approximately €1,000
Legal Fees (1.5%): €7,500
Surveyor Costs: €400
Total Estimated Costs: €66,400
Example 2: Buying a Pre-Owned Home in Mallorca (€500,000)
ITP:
8% on the first €400,000: €32,000
9% on the remaining €100,000: €9,000
Total ITP: €41,000
Notary and Land Registry Fees: Approximately €1,000
Legal Fees (1.5%): €7,500
Surveyor Costs: €400
Total Estimated Costs: €49,900
Comparison Table
| Expense | New Home (€500,000) | Pre-Owned Home (€500,000) |
|---|---|---|
| VAT/ITP | €50,000 | €41,000 |
| Stamp Duty | €7,500 | N/A |
| Notary and Land Registry Fees | €1,000 | €1,000 |
| Legal Fees | €7,500 | €7,500 |
| Surveyor Costs | €400 | €400 |
| Total | €66,400 | €49,900 |
Additional Annual Costs for Property Ownership in Mallorca
Once you own a property in Mallorca, there are annual taxes to consider:
Annual Property Tax (IBI): This municipal tax is based on the cadastral value of the property, typically ranging between 0.4% and 1.1% of the cadastral value. For example, if the cadastral value is €200,000, the annual IBI may range from €800 to €2,200.
Garbage Collection Tax (Basura): This fee varies by municipality and can range from €150 to €300 annually.
Wealth Tax: Applicable to non-residents only if Spanish assets exceed €3,000,000, with rates ranging from 0.28% to 3.45%. For properties valued at €4,000,000, the tax is applied to the excess €1,000,000.
Non-Resident Income Tax: If the property is not rented out, tax is levied on a notional amount set by the government, generally calculated at 1.1% to 2% of the cadastral value.
The Buying Process in Mallorca
Purchasing property in Mallorca involves several steps to ensure compliance with Spanish laws:
Obtain an NIE Number: This is a unique tax identification number for foreigners and is required for any property purchase in Spain. It can be obtained through a Spanish embassy or a local notary.
Sign an Option Contract: Once terms are agreed upon, the buyer pays a 10% deposit to reserve the property. This contract outlines the terms of the sale and the timeline for completion.
Notary Role: The notary oversees the signing of the purchase deed (escritura) and ensures that both parties understand and agree to the terms. This formal process transfers legal ownership from the seller to the buyer.
Simplifying the Buying Process
Mallorca offers a relatively straightforward buying process, but understanding the taxes and costs involved is crucial for a smooth transaction. Whether you’re purchasing a luxury villa or a traditional finca, knowing what to expect ensures you can budget effectively and avoid surprises.
For more details about buying property in Mallorca or to explore properties for sale in Mallorca , contact Charlesdel
