Important things to know when buying property in Mallorca
- 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.
- 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.
- Is there a property purchase tax?
In any property transaction in Mallorca there is a Tax implication depending is the purchase is between 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.
- 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.
- What is the 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.
- What are the Property Rates of the tax?
- Transmission of a property in Mallorca 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.
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