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Contact details: C/ Constitucion, 1 3rd Fl Palma de Mallorca Phone +34971425740, email
guillen@buse.es www.buseinternational.com
BASIC GUIDE TO ACQUIRING A PROPERTY IN MALLORCA
Legal and tax information in force on 25 March 2014
ACQUIRING A PROPERTY
PAYMENT OF TAXES WITHIN 30 DAYS (NIE required)
*The Foreigner's Identification Number (NIE) can be obtained in less than 24 hours if the
interested party visits the immigration office (called Extranjería in Spain) in person.
30 days*
NIE (Foreigner's Identification Number) APPLICATION
Notarized (certified by a notary public) copy of the passport
Forms of application and registration with the tax authorities
Payment of fees
RECOMMENDATION: POWER OF ATTORNEY GRANTED TO A LAWYER
CONTRACT OF SALE / PURCHASE OPTION CONTRACT
It is recommended to pay 10% of the price as a deposit
PUBLIC deed OF SALE executed before notary public
LAND REGISTRY electronic submission SERVICE
Transfer of ownership and possesion
Delivery of dwelling documentation
REGISTRATION IN THE LAND REGISTRY
Protection of registered rights in relation to third parties
Contact details: C/ Constitucion, 1 3rd Fl Palma de Mallorca Phone +34971425740, email
guillen@buse.es www.buseinternational.com
SALE AND PURCHASE COSTS
The buyer normally assumes all costs
derived from the transfer except for tax on
the increase in value of urban land (called
plusvalía in Spain). By way of guidance, the
following costs and taxes can be expected:
notary public (between 600 and 2,000
euros); register of property (approximately
half of the notary's fees) and
administration (between 300 and 1,200
euros).
If a lawyer is engaged, their fees are usually
between 0.5 and 1% of the price of the
property, depending on the complexity of
the transaction and the price of the
dwelling. The lawyer's role is to ensure the
development is legal, check ownership and
charges, prepare the agreement and
facilitate proceedings. Sometimes this
includes incorporating company structures
for the purchase as well as providing tax
advice.
The seller is responsible for paying the
estate agent's fees and municipal tax on
the increase in value of urban land
(plusvalía).
TRANSFER TAXES
VAT or ITP
Property transfer is subject to value added
tax (VAT, called IVA in Spain) or to
property conveyance tax (called ITP in
Spain). The two are mutually exclusive.
As a general rule, we might say that the
first transfer of a dwelling and its annexes
(parking and storage rooms) are subject to
10% VAT. In the case of parking or storage
rooms that are not acquired at the time of
buying the dwelling, the VAT is 21%.
Second transfers are subject to ITP, which
is calculated as follows: up to 400,000
euros, payment is 8%; from 400,001 to
600,000 euros, it is 9%, and from 600,001
euros upwards, it is 10%.
The sale of land without a finished
construction is generally subject to this
scale as regards ITP, or to 21% VAT,
depending on whether the seller is a
private individual or a company, among
other considerations.
Documented Legal Acts Tax (AJD)
Apart from VAT and ITP, public deeds are
subject to a tax called Documented Legal
Acts Tax (called AJD in Spain), which is
1.20% of the value declared on the
document. However, if the transaction is
subject to ITP, then it will not be subject to
AJD, since the two taxes are incompatible.
In practice, purchases subject to VAT will
also be subject to AJD, whereas if they are
Contact details: C/ Constitucion, 1 3rd Fl Palma de Mallorca Phone +34971425740, email
guillen@buse.es www.buseinternational.com
subject to ITP, then AJD will not be
payable. If mortgages are taken out, these
are also subject to AJD.
Municipal Tax on the Increase in Value of
Urban Land (plusvalía)
Paid by the seller, unless otherwise agreed.
If the seller is a professional, it is illegal to
charge plusvalía to the buyer. The amount
depends on the time that has passed since
the last transfer and the cadastral value of
the land.
It is important to highlight that deeds of
purchase will not be accepted at the Land
Registry until the municipal plusvalía tax
has been paid.
TAXES RELATED TO OWNERSHIP OF THE
PROPERTY
IMMOVABLE PROPERTY TAX (called IBI in
Spain)
This is a municipal tax that is normally paid
in October or November. The owner on 1
January each year is the person required to
pay it. It is advisable to clarify who will pay
the tax for the year in course in the
contract of sale.
INCOME ALLOCATION
If the dwelling is not your usual place of
residence, i.e. not your permanent home,
the State considers that it is an asset that
could potentially generate income through
letting, since it is not occupied all year. This
means that it is subject to taxation through
personal income tax.
The amount of the tax is normally low,
since it is calculated based on the cadastral
value, which is normally below market
value. It is advisable to remember that
non-residents are required by law to
submit an income tax declaration every
year through Form 211 (Modelo 211).
CAPITAL GAINS
On selling the property, the transferor will
be subject to taxation on any profits made.
Currently, non-residents are subject to 21%
taxation. Residents are subject to 21% on
profits that are less than 6,000 euros, 25%
on profits less than 24,000 euros and 27%
on gains of more than 24,000 euros.
PROPERTY TAX
This tax was re-established in 2011 and
was initially only to remain in force for two
years. However, it has been extended for a
further year.
For both residents and non-residents,
there is an exemption of €700,000, which
means that in principle, only those persons
whose net assets (value of assets reduced
by the amount of any charges) are more
Contact details: C/ Constitucion, 1 3rd Fl Palma de Mallorca Phone +34971425740, email
guillen@buse.es www.buseinternational.com
than €700,000 are required to submit a
declaration, and, in any event, those whose
assets are valued at more than €2,000,000
euros. The tax rate is from 0.2 to 2.5%, in
accordance with the Tax scale.
INHERITANCE TAX
Inheritors of immovable property located
on Spanish territory will be subject to
Inheritance and Donation Tax, regardless
of whether they are resident in Spain or
not. The applicable tax will be decided
based on a progressive scale from 7.65% to
34% of the actual value (or market value)
of the assets; the final tax payable also
depends on the degree of kinship between
the inheritors and the deceased.
LETTING DWELLINGS
In the Balearic Islands, the Law allows
short-term letting, though it does regulate
commercialisation through tourist
channels. There are limitations as regards
“tourist lettings”, governed by the General
Tourism Law of the Balearic Islands.
“Tourist lettings” means the temporary
transfer of the use of an entire furnished
and equipped dwelling fit for immediate
use, brought to market and promoted for
financial gain through channels aimed at
tourists.
Tourist letting is allowed only in detached
and semi-detached dwellings with a
maximum of six bedrooms and space to
accommodate 12 people. Tourist stays
must be offered with:
a) periodic cleaning of the dwelling;
b) bedlinen, household linen,
furnishings in general and replacement
of the same;
c) maintenance of installations;
d) customer service during business
hours.
Furthermore, a 24-hour phone service
must be available to the tourist.
The one off fee to obtain a permit for
tourist operations is 25.56 euros per
person lodged
DWELLING DOCUMENTATION
The following documentation may be
requested from the seller: bills for supplies,
proof of payment of Immovable Property
Tax (IBI), certificate of up to date payments
to the owners' association (called la
comunidad in Spain), building plans,
certificate of occupancy (called cédula de
habitabilidad in Spain) and energy
efficiency certificate.

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Basic guide to acquiring a property in Mallorca

  • 1. Contact details: C/ Constitucion, 1 3rd Fl Palma de Mallorca Phone +34971425740, email guillen@buse.es www.buseinternational.com BASIC GUIDE TO ACQUIRING A PROPERTY IN MALLORCA Legal and tax information in force on 25 March 2014 ACQUIRING A PROPERTY PAYMENT OF TAXES WITHIN 30 DAYS (NIE required) *The Foreigner's Identification Number (NIE) can be obtained in less than 24 hours if the interested party visits the immigration office (called Extranjería in Spain) in person. 30 days* NIE (Foreigner's Identification Number) APPLICATION Notarized (certified by a notary public) copy of the passport Forms of application and registration with the tax authorities Payment of fees RECOMMENDATION: POWER OF ATTORNEY GRANTED TO A LAWYER CONTRACT OF SALE / PURCHASE OPTION CONTRACT It is recommended to pay 10% of the price as a deposit PUBLIC deed OF SALE executed before notary public LAND REGISTRY electronic submission SERVICE Transfer of ownership and possesion Delivery of dwelling documentation REGISTRATION IN THE LAND REGISTRY Protection of registered rights in relation to third parties
  • 2. Contact details: C/ Constitucion, 1 3rd Fl Palma de Mallorca Phone +34971425740, email guillen@buse.es www.buseinternational.com SALE AND PURCHASE COSTS The buyer normally assumes all costs derived from the transfer except for tax on the increase in value of urban land (called plusvalía in Spain). By way of guidance, the following costs and taxes can be expected: notary public (between 600 and 2,000 euros); register of property (approximately half of the notary's fees) and administration (between 300 and 1,200 euros). If a lawyer is engaged, their fees are usually between 0.5 and 1% of the price of the property, depending on the complexity of the transaction and the price of the dwelling. The lawyer's role is to ensure the development is legal, check ownership and charges, prepare the agreement and facilitate proceedings. Sometimes this includes incorporating company structures for the purchase as well as providing tax advice. The seller is responsible for paying the estate agent's fees and municipal tax on the increase in value of urban land (plusvalía). TRANSFER TAXES VAT or ITP Property transfer is subject to value added tax (VAT, called IVA in Spain) or to property conveyance tax (called ITP in Spain). The two are mutually exclusive. As a general rule, we might say that the first transfer of a dwelling and its annexes (parking and storage rooms) are subject to 10% VAT. In the case of parking or storage rooms that are not acquired at the time of buying the dwelling, the VAT is 21%. Second transfers are subject to ITP, which is calculated as follows: up to 400,000 euros, payment is 8%; from 400,001 to 600,000 euros, it is 9%, and from 600,001 euros upwards, it is 10%. The sale of land without a finished construction is generally subject to this scale as regards ITP, or to 21% VAT, depending on whether the seller is a private individual or a company, among other considerations. Documented Legal Acts Tax (AJD) Apart from VAT and ITP, public deeds are subject to a tax called Documented Legal Acts Tax (called AJD in Spain), which is 1.20% of the value declared on the document. However, if the transaction is subject to ITP, then it will not be subject to AJD, since the two taxes are incompatible. In practice, purchases subject to VAT will also be subject to AJD, whereas if they are
  • 3. Contact details: C/ Constitucion, 1 3rd Fl Palma de Mallorca Phone +34971425740, email guillen@buse.es www.buseinternational.com subject to ITP, then AJD will not be payable. If mortgages are taken out, these are also subject to AJD. Municipal Tax on the Increase in Value of Urban Land (plusvalía) Paid by the seller, unless otherwise agreed. If the seller is a professional, it is illegal to charge plusvalía to the buyer. The amount depends on the time that has passed since the last transfer and the cadastral value of the land. It is important to highlight that deeds of purchase will not be accepted at the Land Registry until the municipal plusvalía tax has been paid. TAXES RELATED TO OWNERSHIP OF THE PROPERTY IMMOVABLE PROPERTY TAX (called IBI in Spain) This is a municipal tax that is normally paid in October or November. The owner on 1 January each year is the person required to pay it. It is advisable to clarify who will pay the tax for the year in course in the contract of sale. INCOME ALLOCATION If the dwelling is not your usual place of residence, i.e. not your permanent home, the State considers that it is an asset that could potentially generate income through letting, since it is not occupied all year. This means that it is subject to taxation through personal income tax. The amount of the tax is normally low, since it is calculated based on the cadastral value, which is normally below market value. It is advisable to remember that non-residents are required by law to submit an income tax declaration every year through Form 211 (Modelo 211). CAPITAL GAINS On selling the property, the transferor will be subject to taxation on any profits made. Currently, non-residents are subject to 21% taxation. Residents are subject to 21% on profits that are less than 6,000 euros, 25% on profits less than 24,000 euros and 27% on gains of more than 24,000 euros. PROPERTY TAX This tax was re-established in 2011 and was initially only to remain in force for two years. However, it has been extended for a further year. For both residents and non-residents, there is an exemption of €700,000, which means that in principle, only those persons whose net assets (value of assets reduced by the amount of any charges) are more
  • 4. Contact details: C/ Constitucion, 1 3rd Fl Palma de Mallorca Phone +34971425740, email guillen@buse.es www.buseinternational.com than €700,000 are required to submit a declaration, and, in any event, those whose assets are valued at more than €2,000,000 euros. The tax rate is from 0.2 to 2.5%, in accordance with the Tax scale. INHERITANCE TAX Inheritors of immovable property located on Spanish territory will be subject to Inheritance and Donation Tax, regardless of whether they are resident in Spain or not. The applicable tax will be decided based on a progressive scale from 7.65% to 34% of the actual value (or market value) of the assets; the final tax payable also depends on the degree of kinship between the inheritors and the deceased. LETTING DWELLINGS In the Balearic Islands, the Law allows short-term letting, though it does regulate commercialisation through tourist channels. There are limitations as regards “tourist lettings”, governed by the General Tourism Law of the Balearic Islands. “Tourist lettings” means the temporary transfer of the use of an entire furnished and equipped dwelling fit for immediate use, brought to market and promoted for financial gain through channels aimed at tourists. Tourist letting is allowed only in detached and semi-detached dwellings with a maximum of six bedrooms and space to accommodate 12 people. Tourist stays must be offered with: a) periodic cleaning of the dwelling; b) bedlinen, household linen, furnishings in general and replacement of the same; c) maintenance of installations; d) customer service during business hours. Furthermore, a 24-hour phone service must be available to the tourist. The one off fee to obtain a permit for tourist operations is 25.56 euros per person lodged DWELLING DOCUMENTATION The following documentation may be requested from the seller: bills for supplies, proof of payment of Immovable Property Tax (IBI), certificate of up to date payments to the owners' association (called la comunidad in Spain), building plans, certificate of occupancy (called cédula de habitabilidad in Spain) and energy efficiency certificate.