Save Taxes When You Sell Your Mallorca Property

Property in Spain

Spanish property taxes are extremely high – those buying a villa for sale in Mallorca may find themselves paying as much as an additional 12% of the purchase price. The Capital Gains Tax (CGT) can be another major shock upon selling the property.

Saving money on real estate transactions. These are very useful tips regarding how to save taxes, or at least pay as little as possible when selling a property in Mallorca.

Vendors pay these taxes

These are the main taxes and fees the vendor has to pay on the sale of a property in Mallorca.

The Plus Valía Tax

The Plus Valía Tax (‘extra value’ tax) has to be paid to the local council and is basically about the rise in value of the property since it was bought. Based upon the current cadastral value of a property several factors need considering:

• The length of time the current owner has had the property – the longer the ownership, unfortunately, the higher the tax.
• The size of the property for sale in Mallorca – large properties pay tax more than smaller ones.
• The location within the municipality is also a major factor because a property in an area with more municipal services and facilities generally have a higher plus valía tax.

The Plus Valía Tax is calculated up to the day a property is sold. The local tax office or a lawyer representing a vendor during the sale process can find out how much the tax will be, so avoiding any unpleasant surprises at the notary. If the finca or villa for sale in Mallorca is large and the vendor has owned it for several years, the bill could mount to several thousand euros.

Capital Gains Tax

Mallorca also demands payment of the Capital Gains Tax (CGT) on the profit made from the sale of any form of property including real estate, this tax is levied in most countries. Locals and EU residents have to pay 19% and non-EU residents are billed 24%.

Real Estate agency fees

The fees for the services of a Real Estate agency to sell a property are usually 5% of the purchase price and are payable by the vendor.

Other fees

Especially foreigners in Mallorca are advised to use the services of a local lawyer who specialises in real estate transactions throughout the sale of a property. Lawyers’ fees are usually 1% of the final purchase price.

The vendor does not pay any notary or land registration fees.

Unavoidable taxes

Unfortunately, the taxes listed above must be paid, it is absolutely impossible to avoid payment of taxes on the sale of a property and there is no way paying the Plus Valía Tax can be avoided. The lawyer, however, will check if it has been applied fairly based upon the right criteria.

Non-payment of CGT

Most people would ideally not want to pay any taxes at all and sometimes this is possible, people do not need to pay CGT:

A person aged 65 or over, who is a tax resident in Spain and selling the home that he/she has lived in for at least the past three years.

A vendor who reinvests all the profit out of the sale of a property in Mallorca that he/she has lived in for 3 years on a property in Mallorca (or the EU) within 2 years of the sale does not pay any CGT.

A very important factor is that a Spanish residency does not automatically mean the holder is a tax resident. To be a tax resident, a person must register with the local tax authorities and have a certificate to prove it.

Savings on CGT

Those who end up having to pay CGT should try to reduce the tax bill as much as possible. The expenses incurred during the time a property for sale in Mallorca has been owned can help to reduce the tax:

Such as legal, notary, land registration fees and property taxes that the vendor paid on purchasing the property.

Fees related to the sale such as real estate agency and lawyer’s fees and any costs incurred by organising the necessary documentation: the energy efficiency certificate and the certificate of the community of owners.

These renovation and improvement costs paid during the ownership: any extensions, installation of a pool or a new kitchen but no maintenance costs.

Most important is that an official invoice with VAT is needed as valid proof of these services carried out during the ownership of the Mallorca villa or apartment for sale.

Employ the services of an expert!

To make sure that you get it right and save as much on taxes as possible and there will be no nasty surprises when you sell your Mallorca property, it is best to seek professional advice and assistance.