As a property buyer in Mallorca there are a number of costs that you have to pay in addition to the property price. Roughly estimated, these ancillary acquisition costs total around 10% – 13% of the purchase price. This amount is made up of taxes and costs for real estate agents, lawyers, tax advisors, notaries and the fees of the offices.
Despite the high level of legal certainty in Spain, the complexity of legal and tax matters in this context is too high for normal buyers to be dealt with without a competent and multilingual lawyer and an internationally oriented tax advisor.
For the time after the purchase you should also entrust a tax advisor with sensitive tax matters and, above all, keeping tax deadlines so that there are no fines.
Depending on whether you are buying a new property from a builder or a resale from a private individual, you will have to pay either VAT and stamp duty or land transfer tax. The different cases are explained below, along with the other costs and taxes that are payable in both cases.
VAT (Impuesto sobre el valor añadido – AJD)
This tax applies to residential properties that are being sold for the first time (first-time occupancies), but also to commercial properties and land. This is a national tax, which is why VAT is the same no matter where the property is located (with the exception of the Canary Islands which have their own version of VAT).
Currently, VAT – known in Mallorca as IVA (Impuesto sobre el valor añadido) – is 10% on the purchase price of residential properties (villas, apartments, etc.), and 21% for commercial properties and land.
The VAT for newly built houses is known in the Canaries as IGIC (Impuesto General Indirecto Canario) and is currently 10%.
Notarization tax / stamp tax (Impuesto sobre Actos Jurídicos Documentados – AJD)
The stamp duty (known as AJD – Impuesto sobre Actos Jurídicos Documentados, tax for notarized legal transactions) is currently (2018) 1% of the purchase price in the Balearic Islands, although this can be higher or lower in other regions of Spain, which is why you always check the current tax rate should. Both VAT and stamp duty are paid by the buyer. If a deposit has also been paid before the sale is concluded, such a deposit is subject to VAT as soon as it has been made.
Real estate transfer tax (Impuesto sobre Transmisiones Patrimoniales – ITP)
This tax is applied when the property has been sold as a second or subsequent transfer (the property is not being bought as a newly built home for the first time) and is paid by the buyer. If a deposit has been paid prior to the closing of the sale, it will not be subject to ITP. However, the complete sum of the ITP must be paid upon conclusion of the sales contract. If this is the case there is no sales tax to be paid and the stamp duty is already included in the ITP.
The real estate transfer tax rate is left to the autonomous regions, which can decide to apply the general tax rate or to determine it themselves.
The general (national) level of ITP is 7%, but many of the autonomous regions use higher property taxes. The tax rate you have to pay depends on the autonomous region in which you are buying.
A staggered system is used for the Balearic Islands (Mallorca, Ibiza, Formentera, Menorca):
8% is estimated for the amount up to a sales value of EUR 400,000,
for amounts between EUR 400,000 and EUR 600,000 it is 9%,
from EUR 600,000 to EUR 1,000,000, 10% is due and
from 1 million EURO it is 11%
Municipal capital gains tax (Plusvalía)
Special mention should be made of the local capital gains tax, also known as Plusvalía. This is only levied on the increase in the value of a property (of the land – not the development) at the time of transfer. The Plusvalía municipal is calculated on the basis of the so-called “valor catastral” of a property. This is an administrative value of the cadastral office, which is usually lower than the market value, sometimes even considerably less. The amount to be paid depends on how long the property has been owned by the seller. The longer this period, the higher the tax will be.
The Plusvalía Municipal tax is mostly paid by the seller, but sometimes the buyer agrees to pay it himself, which is part of the negotiation process.
But be warned, if the seller does not pay this tax, although it is his contractual obligation, the buyer is liable for the unpaid tax, with interest! The town hall could also refuse to register the property in the land register until the Plusvalía has been paid. During this time, however, property tax may still apply, which means that the new owners could accumulate unpaid property taxes, penalties and interest without even knowing it.
If the seller is a non-resident, the safest way to ensure that the seller delivers the Plusvalía Municipal to the municipality within 30 days of the closing of the sale is to agree with the seller to pay this tax with funds as agreed Selling price to be retained by the buyer.
Income tax provision for purchases from non-residents
If the seller is not fully liable to tax in Spain – i.e. resident – the buyer must withhold 3% of the purchase price and pay it to the tax authorities “as security”. If this is not done, then the property will be considered by the tax authorities as an asset that secures the legally required income tax of the seller.
Notary fees
Notary fees are almost always paid by the buyer and calculated in relation to the purchase price specified in the sales contract. To be on the safe side, you should calculate the notary fees as 1% of the purchase price. However, in many cases the notary fees are 0.5% (or less) of this price.
Land registry fees
The costs associated with registering the property in the land register are also almost always paid by the buyer and calculated in relation to the purchase price that was specified in the purchase contract. To be on the safe side, you should also calculate this fee as 1% of the purchase price. However, it again depends on the property and the autonomous region, so this fee could be significantly lower.
Legal fees
It is strongly recommended that you hire a lawyer to advise you during the purchase process. Your lawyer will be able to take a closer look at all of the documentation that is required, but also explain any legal and administrative questions you may face. Your attorney should also carry out all the necessary (due diligence) reviews (property claim, land charges, permits, etc.) and prepare all the documents required to complete the process (property registration, tax payments, etc.).
A lawyer (abogado) calculates their fees according to the services that are required. This fee will also vary based on the complexity of the purchase process. Most lawyers charge 1% of the purchase price, but be warned as some lawyers may charge 1.5% or more of the sale price in fees. Given the simple, routine buying process of a perfectly normal property with no legal complications, even 1% can be an unreasonably high fee. Your best option would be to find a good lawyer who charges for their services on an hourly basis. The legal fees, for a purchase without complications and with an hourly billing, should be around 1,000 to 2,500 euros.
Agency fee for real estate agents or buyers’ agents
Brokerage fees or commissions are paid by the seller, unless otherwise agreed. Conversely, if the buyer uses a property search agency, these costs will be paid by the buyer.
Despite the ability of the internet to bring a buyer and seller together without a real estate agent, most people continue to use an agent to find property in Mallorca. However, you should be aware that realtors in Mallorca charge between 5% and 6% of the sales price, which depends on the region and the type of property. Unless the buyer has expressly agreed to pay the brokerage fees, the cost will be added to the sale price. Therefore, you should always clarify in advance whether you have to pay the brokerage fees and whether these are already included in the agreed purchase price or are offset against it. In this way you can avoid unpleasant surprises.
Mortgage and bank charges
Most banks charge a fee (withdrawal or reception fee) in order to receive money from international bank transfers. If you have not agreed the amount of this fee with your bank in advance, you may be surprised. Usually it amounts to about 0.5% of the value of the transaction. If you transfer € 100,000 to your account during your preparation, you may find that your bank is charging fees of € 500 or more. Fortunately, many bank branches in Mallorca are willing to negotiate this fee. It is usually possible to agree a maximum limit, which is usually around € 30. So be sure to negotiate this fee when opening a new account in Mallorca. Examples of banks include Santander in Sollér.
Fees on checks guaranteed by the bank
If you need a check guaranteed by the bank (check bancaria) to sign the documents with the seller, you should find out beforehand what amount your bank will charge you for it. Similar to the withdrawal or receipt fees already mentioned, this fee can also be 0.5% of the value of the test or more. For this reason, you should, if possible, ask about the amount of this fee when you open the account. In most cases, it is also possible to limit the maximum of this fee to 15 to 30 €.
Powers of Attorney Fees
If you need a power of attorney for your purchase, the costs depend primarily on where you have the power of attorney issued. If the power of attorney is required in Mallorca, it must be certified by a notary. This can cost anything from $ 50 to $ 200. The decisive factor here is whether you hire a lawyer to help you negotiate the price with the notary.
Commissioning of the property (general bills)
After buying a property in Mallorca, you still have to put it into operation and conclude separate supply contracts. A particularly rough guideline for the costs you will have to face in this regard is the following list:
Gas: € 70
Telephone: 70.- €
Water: € 100
Electricity: € 100
