3 Taxes when selling property in Mallorca
If it is time to sell your property in Mallorca, you’ll need some advice and guidance on local Spanish taxes. Balearic Properties is an expert in selling properties, with over 20 years of experience in connecting sellers with buyers looking for a dream home in Mallorca. As well as offering advice for buyers on the cost and taxes related to buying property in Mallorca, we can help sellers understand all the taxes and costs involved with selling real estate in Mallorca.
There are 3 main taxes when selling property in Mallorca:
1. IRPF: Capital gains tax
The main tax when selling your property in Mallorca is the Impuesto sobre la Renta de las Personas Físicas (IRPF). This translates to capital gains tax (CGT), which applies to most countries when selling property. The capital gains tax is a tax paid on the profit you make. If you are a resident in Spain, the IRPF is a variable tax: 19%, 21%, 23% (in 2019) depending on your profit. In case of capital gains the IRPF tax is calculated as follows:
- 19% for the first EUR 6,000 of taxable income.
- 21% for the following EUR 6,000 to EUR 50,000 of taxable income.
- 23% for the following EUR 50,000 to EUR 200,000 of taxable income.
- 27% for the following EUR 200,000 to EUR 300,000 of taxable income.
- 28% for any amounts over EUR 300,000.
Example of capital gains tax when selling property in Mallorca
For example, if you bought an apartment in Palma old town in 2009 for 200,000 euros and in 2019 you decide to sell it for 350,000 euros, you will have to pay capital gains on 150,000 euros profit in the following way:
350,000€ current sale price - 200,000€ original purchase price = 150,000€ in capital gains
19% for the first 6,000€ (6,000 x 0.19) + 21% for the next 50,000€ (50,000 x 0.21) + 23%
on the remaining 94,000€ (94,000 x 0.23)
In numbers that would add up to:
1,140€ + 10,500€ + 21,620€ = 33,260€ as capital gains tax
Situations where you are exempt from capital gains tax
The IRPF capital gains tax is calculated according to capital gains. However, in case of not making any profit, you will be exempt from paying this tax. In other words, you are free from paying capital gains tax when selling property in Mallorca if you reinvest 100% of your profit from the sale of your property into another primary residence, and also if you sell your real estate below the original price you bought it at (at a loss). Lastly, residents over 65 are also exempt from this tax.
Reinvesting your capital gains into another primary residence
When looking to avoid paying capital gains tax by reinvesting the bulk of your profit, it is necessary to declare your intention to reinvest in another primary residence. It is only possible to obtain this tax benefit if you declare your intentions in your income tax declaration, the Declaración de la Renta and you reinvest the full amount obtained from the sale of your property within 2 years from receiving the payment.
Capital gains tax for non-residents
The taxes when selling property in Mallorca as a non-resident are slightly different. You will have to pay a non-resident income tax which is 19% for EU residents (also including residents from Iceland and Norway) and 24% for residents from non-EU countries. This tax is the so-called Impuesto sobre la Renta de no Residentes. Non-residents from EU or EEA countries may also be exempt from this tax when reinvesting into a primary residence (not necessarily in Spain).
2. Income tax provision (non-residents only)
Another tax non-residents selling property in Mallorca should bear in mind is the income tax provision or Retención, which is 3% for non-residents. The Spanish Tax Agency withholds 3% as a guarantee to cover any taxes resulting from the sale of your property. However, you can always claim for a refund if your tax liability is less than 3%. This tax is taken directly from the purchaser. Hence, you only receive 97% of the amount your property was sold for until your settle your CGT.
3. Plusvalía municipal
Last but not least, this tax is calculated according to the cadastral ground value, location, and the period of ownership of your property. In other words, the Plusvalía is a tax based on the increase in value of urban land. Hence, rustic land (not fit for building) is not subject to this tax. The tax only applies to the value of the grounds, not the construction, and it is calculated accordingly by your local town hall. Furthermore, this tax is paid regardless of whether you sell for a profit or loss.
The plusvalía tax is based on the rise in value of your land
The plusvalía taxes when selling property in Mallorca can differ according to municipality. This tax is specifically related to the rise in value of your land over your period of ownership. So if your property is located in a municipality which was once up-and-coming but is now in high demand, you can expect to pay more than in other areas in Mallorca. The most expensive property locations in Mallorca most definitely include the municipalities of Calviá and Palma.
Another expense related to selling property in Mallorca includes getting an energy certificate. Obtaining an energy certificate is required by Spanish law since 2013. All property owners who wish to sell or rent out their property need an energy certificate, which is issued by a qualified professional such as an architect or surveyor. The cost of this certificate depends on the size of the property, approximately 100-500 euros but it can be deducted from your capital gains tax.
If you have decided to sell your property in Mallorca through an estate agent, you can also expect to pay an agency commission. An agency commission is paid by the seller of the property and can also be deducted from capital gains tax. Balearic Properties handles the entire process when it comes to selling your home; including valuations, viewings, marketing and communication with lawyers and notaries. We also provide advice on taxes when selling your property in Mallorca.
Choose Balearic Properties when selling your property in Mallorca
Balearic Properties has over 20 years of experience in selling real estate in Mallorca, and our reputation speaks for itself. As an associate of Savills, we are able to market your property across 60 countries. We also have over 1800 new clients each year looking to buy real estate in Mallorca. Our real estate experts will listen to your concerns, and sell your property according to your needs. Visit one of our offices in Pollensa or Puerto Portals to discuss selling your property in Mallorca.
Contact Balearic Properties to sell your property.