Taxes and fees when purchasing a property on Mallorca
The Spanish central government and autonomous regions have enforced numerous tax increases within their jurisdiction. Below is the legal position as of January 1st 2014.
Between 8% and 11% of the purchasing price of the property has to be paid by the purchaser. Notary fees and property registry is about the amount of 2% of the value escritura (title deed).
When purchasing a property the buyer must pay value added tax (VAT) or real estate transfer tax (ITP).
Value added tax (VAT)
This is paid only in the case when the property is being sold by a company or a business person. This is 21% on the sale of building plots and commercial property. On first time sale of newly built properties such as houses, townhouses or newly built flats, the tax stands at 10%. In all cases where VAT is paid, then 1,2% stamp duty tax has to be paid. All subsequent sales are not subject to VAT but to real estate transfer tax (ITP).
Real Estate Transfer Tax (ITP)
On all sales that are not subject to VAT then the real estate transfer tax (ITP) is applicable. The real estate transfer tax is a regional tax which varies according to each autonomous region. Presently the Balearic Government has established the real estate transfer tax as follows:
- The first € 400,000 of the purchase price will be taxed at 8%.
- Between € 400,000,01 and € 600,000 real estate transfer tax is 9%.
- Between € 600,000,01 and 1 Million € real estate transfer tax is 10%.
- Everything over 1 Million the real estate transfer tax is 11%.
Property Tax (Impuesto sobre Bienes Inmuebles, IBI) is paid annually and is levied on the value of land and urban land according to the assessment of the local council. The cost of property tax varies from municipality to municipality and is in the region of 0,4% and 1,1% of the cadastral value for developed land and between 0.3% and 0.9% for undeveloped land. Due to the present crisis many municipalities have increased said tax by between 6% and 10%.
Non-residents who use their property themselves must pay income tax on the property. The tax is calculated as follows: 1.1% of the cadastral value on which then 24.7% tax will be payable.
The rate ranges from 0.2 to 2.5% of all assets located in Spain. There is a tax free allowance of €700,000. If a property has two owners (e.g. couple who own 50% each) then each is entitled to the allowance.
Appreciation Expensive (Plusvalia)
This tax is charged by the competent municipal. It is the tax for the increase of the property or land since the last change of ownership. The basis for the amount of such property tax, each community has value tables. Legally responsible for the payment of Plusvalía is the seller.
The commission fee is generally included in the purchasing price and is supported in Spain by the seller!