Buy Properties in Mallorca
00 34 971 53 22 21

Properties in Mallorca:

Balearic Properties
Mallorca Office:
Joan XXIII 90
Puerto Pollensa Mallorca
Phone: +34 971 86 77 00
Fax: +34 971 86 78 00

Pollensa Old Town Office
Via Pollentia 3
Phone: +34 971 53 22 21
Fax: +34 971 53 45 06

FAQ Mallorca Property

Answers to frequently asked questions when buying property in mallorca.

Buying process
What stages are there in the completion process? The property is selected and the terms agreed on. The property must then be secured. This can be done through private contracts between the two parties. It is customary that 10% of the purchase price is paid at this time. On completion a deed of conveyance "escritura pública" must be signed by both parties under notarial supervision.

Legal Is it necessary to appoint a notary? Yes. Who pays the legal fees? In theory, notary's fees are paid by the seller, unless agreed otherwise and are fixed by law on the basis of a scale. It is advisable to appoint a local lawyer, who speaks the purchaser's language who will carry out a title search, and advise the purchaser on all aspects of the investment. Lawyer's fees are between 1-2% of the purchase price of the property. Estate Agents’ fees vary depending on the state or region and also on the type of property.

Taxation on Mallorca Properties
Is there a purchase tax? On new residential buildings there is VAT (IVA) charged at 7% of the value, plus 1% stamp duty, and these are paid by the purchaser. However, on urban plots, commercial premises and some garages (not annexed to a home) purchased from developing or trading companies, VAT is 16%. On re-sales there is a property transfer tax set at 7%. In all cases there is a surplus value tax “plusvalia” (not to be confused with capital gains tax payable by the seller on the profit made when selling the property). In theory, “plusvalia” is paid by the seller, and is a municipal tax on the increase in value on the land only. However, it may be subject of negotiation between buyer and seller.
Registration
Is it necessary to register the new ownership? Yes, this is done by entering the deed of conveyance “escritura publica” at the land register office. Some of the main taxes for non-residents in Spain include the following:

a) Municipal Added Value Tax (PlusValía): Please refer to Part 1 of this article ”Municipal Added Value Tax (Plus valía)”
b) Rates or Annual Property Tax (IBI): Please refer to Part 2 of this article ”Local rates or Annual Property Tax (IBI)”
c) Rubbish Tax (Basura) Please refer to Part 2 of this article ”Rubbish collection & water rates (Basura) (Agua)”
d) Wealth Tax (Impuesto de Patrimonio)
e) Income Tax (Impuesto sobre la Renta)
f) Capital Gains Tax (Impuesto sobre Ganancias Patrimoniales Inmobiliarias) and Retentions

d) WEALTH TAX

Non-residents must pay a WEALTH TAX on their assets in Spain. The amount of tax is determined based on the individual wealth. The cost price of the property is usually the basis for the calculation of the tax.

Ownership
Are there different methods of ownership?
Apart from individual ownership, a property can be owned by one or more companies. Owning companies can be Spanish, from countries with double taxation agreements with Spain or offshore or a combination of these.

Residence Permits
Is it necessary to have a residence permit?
No, it's not necessary for EEC citizens or citizens coming from the Swiss confederation. For non-EEC citizens, if they want to reside permanently in Spain, they would need to obtain a special visa at the spanish consulate in the country of origin which allows them to apply for a residence permit.

Selling property
A non-resident seller is subject to a 5% tax withholding on account of any possible capital gains tax. If the seller’s liability is less than 5%, the seller can claim it from the tax office. Capital gains tax is 35% of the profit of the sale. There is an exception regarding the 5% retention: when the property has been owned by the vendor, at the date of the 31st of December 1996, for more than 10 years and when the vendor is an individual (not a non-resident company).

Professional advice:
The laws and people’s personal circumstances continuously change. These questions and answers are only general, and we strongly recommend that you contact a professional lawyer or financial advisor. Our office would be delighted to recommend reputable professionals in both fields.

Annual Property Taxes

I.B.I . (Impuesto Bienes Inmuebles)
This is a real estate tax levied by the local townhall and is usually 0.85% of the cadastral value (valor catastral)
Property Income Tax
It covers the period starting from Jan. 1st to Dec. 31st. of each year, and is payable during the following year (only for urban properties). The income rate is 25% and is applied on the taxable base. This base, which is the estimated income, is obtained by multiplying the cadastral value of the property by 2%. In some cases the multiplier is 1,1%: when the cadstral value has been updated after Jan.1st 1994; when the property has no cadastral value or the owner of the property has not been notified of this value, in which case the value to be adopted is 50% of the purchase price declared in the title deed, or that assessed by the tax office, whichever is the higher.

Property Wealth Tax
The non-resident owner of a property in Spain will be taxed on the value of the real estate on account of wealth tax. The base is taxed according to a sliding scale (between 0.20% to 2.5%). The taxable base will be the highest of the following values: a) The cadastral value; b) The value estimated by the tax authorities; c) The purchase price declared on the deed of conveyance.
Property owned by a non-resident company
When the owner of the property is a non-resident company, a special tax has to be paid and from 1996 the rate applicable is 3% of the cadastral value of the property (when there is no cadastral value, the same rule of the wealth tax is applicable).

Other taxes/expenses

Garbage collection tax.
To be paid to the local authorities.

Community Fees
Generally speaking, the Community of Co-Proprietors or Homeowners’ Association is a legal entity comprised exclusively of the owners of the apartments in a building, or villas on an estate. The purpose of the Community is to own and maintain the common elements of the building or estate in question, and each homeowner is obliged to participate in the expenses of the upkeep of the community areas and services on a prorated basis with the other owners. Usually, a homeowner’s percentage of the costs is fixed by the size of the apartment, or plot, divided by the total area of all the apartments or plots.

A budget for the annual community expenses is presented at the annual general meeting of the homeowners, and they or their authorized representatives must approve the budget by majority vote of those present at the meeting. Expenses can vary substantially according to the services provided, and normally include salary and social security of the hall porter, common garden maintenance, lift maintenance, repairs to common elements, rubbish collection, water for watering community gardens, electricity for lighting communal areas, insurance, security, and administration fees. The President of the community must, by law, own a property within the complex itself and is chosen by way of vote by the co-owners. The President has no remuneration for this role.

A typical 2 bedroom apartment in a building or area with a hall porter, swimming pool, and a small garden, could cost between €120/£81 to €300/£202 per month in community fees – but could go up to €600/£404 or more per month in a high luxury building with a large community staff and many services.

In the case of an individual villa in an estate of villas, community fees are often less since the private gardens and exteriors of such properties are generally not maintained by the community, and the community fees are limited to road and roadside garden maintenance, basic common service maintenance, and security.

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