Before even making an offer on a property in Mallorca, it’s wise to create a tax plan detailing the specific tax implications you may face once you make your purchase. This is important for understanding both the lump sum you will pay as well as the tax breakdown.
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What taxes to anticipate when purchasing a property in Mallorca
The tax implications of buying a property in Mallorca depends on the state of property: is it a new build or an existing home?
If you’re planning to buy a new property, or one that has been completely renovated by a property developer, you must pay a 10% tax rate. This is the VAT (otherwise known as IVA in Spain) that must be paid on the day of purchase.
Afterwards, you will be required to pay a 1.5% Spanish Stamp Duty Tax (Actos Jurídicos Documentados) within 30 days of signing the Purchase Deed. However, if you are buying an existing home from a private seller, you will have to pay a Transfer Tax (Impuesto de Transmisiones Patrimoniales or ITP) instead. You are expected to pay this within 30 days of the purchase.
This tax is on a sliding scale as follows:
- A property valued at 1 to 400,000 euros will include an 8% tax rate
- A property valued at 400,001 to 600,000 euros will include a 9% tax rate
- A property valued at 600,001 to 1,000,000 euros will include a 10% tax rate
- Finally, a property exceeding 1,000,000 euros will include an 11% tax rate
Annual taxes for property ownership in Mallorca
- An annual property tax (Impuesto de Bienes Inmuebles or IBI): this tax is paid once a year at the local town hall
- Garbage collection tax: this is also collected at the local town hall.
- Incinerator tax: many localities collect this tax in conjunction with the garbage tax
- Income tax for non-residents: this tax (tax code 210) must be paid yearly by December 31st. You can liquidate the income from the property if it is a rental, but if you are not using it as a rental property you must pay an annual amount depending on the value of the home.
- Wealth tax: If you are a non-resident, you will only be liable for your Spanish assets. Wealth tax rates vary depending on the region. The Balearic Islands, where Mallorca is located, has a wealth tax rate ranging from 0.28% up to 3.45% depending on the worth of the assets.
|Base payable (€)||Full payment (€)||Remaining liquidable base (€)||Tax rate (%)|
|10.909.951,99||258.832,84||From now on||3,45|
Not every non-resident will pay this wealth tax. Wealth taxes are issued only when your assets exceed 700,000 euros. So, if your assets in Spain value 800,000 euros, you will only pay the wealth tax for 100,000 euros as that is the exceeding amount from the required 700,000 euro starting point.
We spanish also pay wealth tax. If you do become a Spanish resident, you will be liable for all your assets (worldwide). However, Spanish residents are allowed 700,000 euros in addition to another 300,000 euros for the value of their permanent residence.