Important things to know when buying property in Mallorca
Buying process in Spain
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 in Mallorca.
Legal Advice in Spain - Properties in Mallorca
Is it necessary to appoint a Mallorca notary?
Yes. Who pays the legal fees? Notary's fees are paid by the buyer, and 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.
Mallorca Property Taxation
Is there a purchase tax?
In any property transaction in Spain there is a Tax implication depending is the purchase is betweek private persons or developers.
TRANSFER TAX (Impuesto de Transmisiones Patrimoniales-ITP)
The ITP – Transfer Tax is imposed on civil and not mercantile operations.
In purchases/sales between private persons onerous transfers of properties (TPO = Transmisiones Patrimoniales Onerosas) are completely incompatible with VAT. When TPO is paid cannot incur VAT.
Schedule of the tax
In onerous transmissions of real estate properties and in the constitution and granting of real rights are applied the following rates (the part charged with 7% is dispensed):
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.
VAT incurs in mercantile operations:
Cession of properties or services realised by businessmen or professionals in the exercise of their activity.
Example: The supposed rate in the real estate area is, when the vendor is a promoter, (passive subject of the VAT), in a first transmission of the object to a private person.
Rates of the tax
It tributes in the following manner:
- Transmission of a housing 10% V.A.T.
- Transmission of a garage or plot 21% V.A.T.
- Transmission of the housing + up to 2 garages 10% V.A.T. (in case there exists a third garage, only this one tributes on 21%)
This tax is collected by the national fiscal authority.
Is it necessary to register the new ownership?
Yes, this is done by entering the deed of conveyance escritura publica ( Property Title Deed)at the land register office.
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.
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. Please ask our profesional sales team to recomend you an english speaking solicitor in Mallorca.