Congratulations, you have found the property of your dreams in Mallorca!
Now it is important to consider allthe details involved in settling the necessary legal agreements of your property in Majorca. As every real estate deal is different we generally recommend you to consult a lawyer who is familiar with the Spanish law (see affiliations). The following key points will give you an idea of what needs tobe kept in mind:
1. Check the property registration
At the Land register, which is available for public inspection, you can check if the owners of the property orland are registered and if there are any outstanding mortgages or claims against the title holder, as well as you see information about the sizes and others. We recommend you not to buy a property before you have received the current land register information. Your lawyer will do this for you. If you buy a property with Engel & Völkers, of course we handle this for you as well!
2. Property owner communities and supplies
Should the property be part of a community, it is important to ensure that all past duties, maintenance costs and community reserves have been paid. The community’s spokesperson should confirm this in writing. A copy of the meeting minutes of the latest proprietors’ reunion can provide you with useful information about maintenance measures, etc.
To make sure that all supply costs are paid (electricity, water, gas, telephone), you should ask for the respective paid invoices from the seller to make sure that everything is paid before the notary date. If you buy a property with Engel & Völkers, of course we handle this for you as well!
3. Certificate of Occupancy (“Cédula dehabitabilidad”)
One of the most important requirements is the existence of the Certificate of Occupancy (“cédula dehabitabilidad”). A Certificate of Occupancy not only confirms compliance with existing occupancy regulations, but also ensures our own safety and health.
In Spain, the initial conclusion of an option contract between the buyer and the seller is common practice. This written document includes agreements regarding an advance payment, normally 10% of the purchase price. The notary appointment will then take place within the period of time that has been agreed upon by both parties. Before signing the option deal or purchase agreement the buyer needs to make sure that the property will be free of any mortgage repayments, tenancy agreements, etc. before being handed over. After the property purchase agreement has been signed by the buyer and the seller or their authorized representatives in the presence of a notary,the change of property ownership will be recorded at land registry.
5. Charges and taxes
5.1. According to Spanish law, thebuyer has to pay:
A) Single payment of taxes
VAT (Value added tax, Spanish “IVA”): 10% IVA plus 1,2% additional Tax of Documented Legaltransactions (Spanish “AJD“) if the property is new-built and the owner a building company.
Real Estate transfer tax (Spanish “ITP“): For all not new-built properties, the buyer has to pay the real estate transfer tax according to the region where the property islocated. On the Balearic Islands, the tax is calculated as follows:
Until 400.000€ it is 8%
From 400.000€ to 600.000€ it is 9%
From 600.000€ to 1.000.000€ it is 10%
From 1.000.000€ on it is 11%
For example, if the purchase price is 550.000€, you pay 8% for the first 400.000€, and 9% for the remaining 150.000€.
B) Taxes to be paid on a regularbasis
Land Tax (Spanish “IBI” = Impuesto sobre bienes inmuebles): The land tax has to be paid yearly to the townhall and is calculated with the cadastral value of the property. The amount of the land tax is different in every municipality.
Income Tax : If you are resident in Spain and you are renting out your property, you have to pay taxes on the difference between your rentals income and expenses.
IRNR: (Non-Resident Income Tax):
Urban properties that are neither rented out, nor are used for commercial purposes nor are used as main residence, lead to a fictitious yearly income of 2 or 1,1% of the cadastral value of the property.
Rented urban property:
- If the owner is EU Resident, Iceland and Norway, they have to pay 19% tax on the difference between their income and rental expenses.
- If the landlord is a non-EU Resident, ie not a member of EU Iceland and Norway, he must pay 24% of the income generated from the rent.
Wealth Tax: Since 2011, you have to pay the wealth tax again in Spain with an exempt amount until 700.000€. The resident tax payer, taxed on the regional scale ranging from 0.28% to 3.45%. While Non-Residents can choose the autonomic or state scale (in this case, the state scale is more profitable). The state scale ranges from 0.2% to 2.5%
5.2. According to Spanish law, the seller has to pay:
Municipal capital gains tax (Spanish “plusvalia”): This tax is calculated from the value increase of the cadastral value of the property since the last purchase/change of owner.
Profit tax: If you have sold your property in Spain, you have to pay this profit tax. Residents have to pay between 19-23%, non residents 19%
Please take advantage of our experience. Our goal is to give you the best possible service in the purchase / sale of the property and guide you through this whole process.
The Estate agency Engel & Völkers would be pleased to give you useful advice and recommend you a professional company that is expert in all tax matters.
Engel & Völkers Santa Maria: +34 971 621629 or website E&V Santa Maria
Engel& Völkers Inca: +34 971 507720 o página web E&V SantaMaria.
Engel & Völkers Llucmajor: +34871 570000 or website E&V Llucmajor