To ensure our client´s buying process is smooth, in Unique Villas Mallorca we provide you with the general information you need to know on how to buy a property in Mallorca.
However, since laws and regulations are subject to change, we strongly advise you to hire a lawyer that can assist you in the buying process. If needed, we can always recommend you qualified professionals that will assist you and provide you with both legal and financial advice.
Once the buyer decides to buy a property and the terms confirmed, the next step is to secure it. This will usually happen through a private Option Contract between the buyer and the seller. 10%, of the purchase price is usually paid on signing of the option contract. The option contract protects the buyer in the sense that once it is signed, if the property is sold to a different party, the seller will have to compensate the contracted buyer. Likewise, the seller is protected through this contract: the buyer will lose his deposit in the event of non-completion of the purchase. Finally, the option contract must include a clause specifying the period when the deed of conveyance will be signed.
On completion of the transaction, a deed of conveyance (Escritura Pública), must be signed by both parties under notarial supervision. (Notaries are public officials that have been given the power to legalise property purchase transactions).
The following step is to register the deed of conveyance at the Land Registry (Registro de la Propiedad). The buyer can do this himself or pay a lawyer or the notary office to do it for him. This registration process requires proof of several payments by the buyer such as the transfer tax (Impuesto sobre Transmisiones Patrimoniales), for resale property from a private individual, or the VAT (IVA & AJD) and Stamp Duty for new build property.
It is important to remember that ownership of all supplies (electricity, water, telephone…) will have to be changed as well. A Gestoria or Legal services firm can assist you in this process.
When buying a property in Spain you will need to apply for a N.I.E. number, that you need to have before signing the public deed. It usually takes from 3 to 5 weeks to obtain this number. You can either apply for it or ask your lawyer to do it for you.
Below we include the different costs a buyer will have when purchasing a property in Mallorca but please bear in mind that the actual cost will depend on your particular circumstances.
ITP tax or Transfer Tax
This tax applies if the property is deemed to be a second or posterior transfer (i.e. not the first time a newly built home is bought), and is paid by the buyer. In this scenario there is no VAT to pay, and stamp duty is already included in this tax. The rate of ITP you pay depends upon the autonomous region where you buy. In Mallorca this rate is fixed by a regulation on the basis of a scale.
VAT tax and Stamp Duty
These taxes apply for residential properties being sold for the first time (never previously occupied), or for commercial premises and plots of land and garages (not annexed to a home). This is a national tax, so VAT is the same wherever the property is located (with the exception of the Canaries, which have their own version of VAT). At present VAT is 10% on the purchase price of residential properties (villa, apartment, etc and 21% for commercial premises, plots of land and garages (not annexed to a home).
In Mallorca, the Stamp Duty (known as AJD) is 1,20% of the price of the purchase, but might change, so be sure to check on the latest rate. Both VAT and Stamp Duty are paid by the buyer. In this scenario there is no transfer tax to pay. (autonomic tax).
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. However, it may be subject of negotiation between buyer and seller.
Notary fees: these fees are usually paid by the buyer-unless agreed otherwise- and are fixed by law on the basis of a scale. They are calculated in relation to the purchase price declared in the deeds of sale. They are usually a 1% of the price declared in the deeds, but again this % is variable.
Land Registry fees: these fees are fixed by the law as well and they are usually a 1% of the purchase price.
Legal firm fees: this cost can vary, management fees for the payment of taxes and registration of the property.
Lawyer’s fees are between 1-2% of the purchase price of the property depending on the complexity of the purchase. This fee can be negotiated especially for large value properties.
Banking Costs
To pay for the property, you will more than likely need to write a banker’s cheque. In order to do that, you will need to open an account in a Spanish bank and transfer money from the bank in your country. The cost of transferring the money can go up to 0,4% of the amount transferred. The banker’s cheque will most likely cost 0,5% of its amount.
Concluding, we suggest that the buyer adds at least 10% to the agreed purchase price, which will cover most of the expenses involved in the purchase. If a mortgage is required, there will be additional opening fees, property valuation costs, and the mortgage itself.
Please note that property can be owned by more than one individual or by a company. In the case of company ownership,depending on which is the case -Spanish in orgin, companies from countries with double taxation agreements with Spain, offshore, or a combination of any of these -different regulations and taxation agreements will apply when selling the property.
EU Members: It is not necessary for EEC citizens or citizens coming from the Swiss confederation to have a Spanish residence permit. For non-EEC citizens, if you want to reside permanently in Spain, you would need to obtain a special visa at the Spanish consulate in your country of origin, which then allows you to apply for a residence permit.
Residency for non EU members: Golden Visa
In September 2013, the Spanish Government enacted the Entrepeneur´s Law, introducing residency visas and permits for non-EU investors allowing them to obtain qualified residency permits in return for investing in Spanish real estate-acquisition of real estate located within Spanish territory of at least €500,000 per applicant -and leading to permanent residency upon fulfillment of certain requirements. Please contact us for more information on the requirements to apply for the Golden Visa.
