Buying in Mallorca
Taxes and costs when buying a property in Mallorca
Since 01.04.2012, the purchase of real estate in the Balearic Islands is taxed at between 8% and 11% (depending on the purchase price) of the notarised purchase price, which must be paid by the purchaser. Notary fees and land registry fees amount to approx. 2% of the Escritura value (title deed).
Non-recurring taxes
When buying real estate, the buyer must pay either value added tax (IVA) or land transfer tax (ITP).
Value added tax (IVA)
VAT only applies to sales by an entrepreneur. This amounts to 21% for the sale of building land and commercial property. For first-time sales of newly built condominiums, single-family houses or apartment buildings, 10% IVA applies. All transactions subject to VAT are subject to an additional 1.2% stamp duty. All subsequent transfers are not subject to VAT, but to land transfer tax (ITP).
Real Estate Transfer Tax (ITP)
All sales that are not subject to VAT are subject to real estate transfer tax (ITP). The real estate transfer tax is a regional tax that varies in the different autonomous regions. Currently, in the Balearic Islands, the real estate transfer tax is calculated as follows:
- The first €400,000 of the purchase price is taxed at 8%.
- Between € 400,000.01 and € 600,000 the real estate transfer tax is 9%.
- From €600,000.01, a tax rate of 10% is applied.
- A purchase price of € 1 million or more is taxed at a rate of 11%.
- Current taxes for the buyer are property tax and income tax.
Real Estate Tax (IBI)
Property tax (Impuesto sobre Bienes Inmuebles, IBI) is levied by the municipality on the value of rural and urban land based on the cadastral value and is payable annually. The amount of property tax varies from municipality to municipality and is usually between 0.4% and 1.1% of the cadastral value for developed land and between 0.3% and 0.9% for undeveloped land. Many municipalities have increased property tax between 6% and 10% due to the financial crisis.
Income Tax
Non-residents who use a Spanish property themselves must pay tax on this owner-occupied value as income. The tax is calculated as follows: 1.1% of the cadastral value, on top of which 24.7% tax is then payable.
Value Added Tax (Plusvalia)
This tax, levied by the respective municipality, taxes the increase in value of land since the last change of ownership of the property. The basis for the amount of this real estate tax is the municipality’s own value tables. By law, the seller is responsible for paying the Plusvalía.
Wealth Tax
The tax rate is between 0.2% and 2.5% for all goods located in Spain. There is an exemption amount of €700,000. If a property has e.g. two owners (married couple with 50% each), the tax-free amount is due to each of the two owners.
Brokerage Fees
The brokerage fee is always included in the purchase price and is paid by the seller in Spain!