Buyers of a property in Mallorca should keep an eye on the additional costs. If you don't take taxes into account, your financing could be at risk. Sellers are also subject to taxes.
The taxes that are incurred when buying a property in Mallorca include one-off and ongoing levies to the tax authorities. Important changes have come into force this year that you should be aware of.
Property transfer tax
If the buyer and seller are natural persons within the meaning of the law, a property transfer tax (impuesto sobre transmisiones patrimoniales, ITP) is initially due. While it was previously levied on the market value of the property, the cadastral value has been decisive since 2022. This is determined by the land registry office (Dirección del Castastro). It is based on the prices of notarized property transactions. However, the condition of the property in question, i.e. any modernizations or renovations, is not taken into account.
You should hand over the calculations to a reliable tax advisor. You should always keep receipts for this, as the land transfer tax paid reduces the taxable profit in the event of a sale.
The tax office can check
If you purchased your property before 2022, the tax office has the right to audit it. This results in the risk of a subsequent higher market value. Our tip: Always state the actual purchase price to the notary and avoid paying part of the purchase price in the black. We have listed the scale of the land transfer tax on the balearen in our table.
If the purchase price of a property acquired since 2019 does not exceed 200,000 euros, a primary residence is established in the property and it is either the first purchase of a property or the first purchase for owner-occupation, only five percent real estate transfer tax is payable on the purchase.
VAT (IVA)Other regulations apply to new builds, which incidentally also include the purchase of an apartment. If the buyer is a legal entity, value added tax (IVA) is due. The respective IVA rates depend on the type of property: apartments and houses are charged at ten percent, commercial properties and garages at 21 percent.
Property tax (Ibi)
In addition to land transfer tax, there is also property tax (IBI), as in Germany, for example. It is a recurring tax and is levied annually. It is calculated on the basis of the cadastral value and therefore varies from municipality to municipality. Important here: Ask the seller to provide you with the IBI receipts, because as the buyer you are liable for any tax debts. You also have an overview of how much property tax is due. The IBI is paid to the Agència Tributària de les Illes Balears (ATIB); standing orders are only possible from a Spanish account.
Income tax (IRPF)
If you are a resident property owner, i.e. you do not use the property for more than 183 days a year, you are subject to unlimited tax liability. They therefore pay income tax (Impuesto sobre la renta de personas físicas, IRPF for short) in Spain. Residents who own real estate, on the other hand, are obliged to make an annual tax declaration. This is based on a notional use value of 1.1 percent of the cadastral value. Non-residents pay 19 percent income tax on this. This tax is paid to the central tax office in Spain (www.agenciatributaria.gob.es).
Property taxA wealth tax is levied on assets in Spain. Since 2016, the tax-free amount for residents and non-residents has been a uniform 700,000 euros. If this amount is exceeded, a corresponding tax declaration on the assets becomes mandatory as at December 31 of the previous year. The tax rates for residents are 3.45% per year and person, and 2.5% per year and person for non-residents. This shows that the tax-free amount applies per person and enables higher values with a lower tax burden in the case of joint property purchases by two or more people. Another way of complying with the limits of the tax-free allowance is to enter a mortgage.&By the way: Assets in Germany are not subject to Spanish property tax. This also applies to Spanish current accounts that are held as non-resident accounts and in which money is "parked".
Certification tax
Finally, as a buyer, you should also have another tax in mind: The so-called "stamp duty" or "notarization tax" (Impuesto sobre actos jurídicos documentados). It is levied on the issuing of official documents. Since January 1, 2020, this has been 1.5% of the notarization value, i.e. the notarial purchase price.
Taxes as a sellerThe capital gains tax (plusvalia municipal) must be paid by sellers of a municipal property. It is based on the increase in value of the property in the respective municipality. The plusvalia was newly regulated by Spanish lawmakers when it came into force on November 8, 2021. It should not apply if the seller has made a loss.
Sellers now have a choice: either the capital gains tax is calculated according to the cadastral value or the real value of the property. You can find out more about the calculations from your tax advisor.
There is also a profit tax. Profits from a property sale are subject to 19% tax. A so-called speculation period, which (as in Germany) allows tax exemption after ten years, does not exist in Spain. For non-residents, the seller retains three percent of the purchase price and pays it to the tax office.An example calculation:
Marc Fischer
