The answer to the question of whether US citizens can buy property in Mallorca is YES, although as I will explain below there are some peculiarities.
In the last few months the interest of US citizens in buying property in Mallorca has increased especially due to the new air connections between the island and New York.
What are the peculiarities of buying a property in Mallorca for a US citizen?
1.- The need for a defense permit.
If a US citizen wants to buy a house in Mallorca and the house is on rural land, he/she will have to apply for a special permit from the Ministry of Defence. Your lawyer can apply for it.
2.- Slow transfer of funds.
Funds coming from the United States, as well as all funds coming from abroad, but especially those coming from outside the European Union, are carefully scrutinised. The authorities check the origin to ensure that they do not come from money laundering. This means that extra days must be allowed for the transfer. If the authorities require additional documentation, they freeze the funds until it is provided.
3.- Taxation. The United States and Spain have treaties to avoid double taxation.
Process of purchasing a property in Mallorca by a US citizen.
The purchase process is totally different to the US process. To begin with, there is no registered figure such as the Relator to guarantee the transaction.
There are two parties, buyer and seller. The seller hires a real estate agent who markets the property and therefore works for the seller.
The buyer therefore needs a professional who is only on his side and advises him. This figure is the lawyer specialised in the real estate sector.
Negotiation and pre-contract.
The conditions are negotiated and a pre-contract is signed in which the buyer pays 10% (which he will lose if he does not buy) and the seller must return double if he does not sell.
This contract reserving ownership is crucial as it must define very well the interests of the buyer.
It must oblige the seller to sell free of encumbrances.
It must foresee retentions to the seller in case there are debts on the day of the sale.
It should also provide for withholdings to meet the seller’s tax obligations which, if not met, can be claimed from the buyer.
Should provide for exit clauses in case, for example, the property has urbanistic illegalities (many properties in Mallorca have illegal parts).
The signing of the purchase.
The property is purchased before a notary public who attests to the transaction (but does not guarantee the status of the property). At the moment the purchase is signed and the price is paid, the US citizen who wants to buy a property in Mallorca, becomes the owner.
After the purchase.
The property has to be registered but first the purchase taxes have to be paid.
Once the taxes have been paid, the deed of purchase is presented to the land registry and registered in the name of the buyer.
What taxes does a buyer pay for the purchase of a property in Mallorca?
The purchase can be taxed in different ways.
-With a 10% VAT if it is a new property and to this tax you have to add 1.5% for documented legal acts.
-With 21% VAT if it is a property under construction (not finished) and to this tax must be added 1.5% of documented legal acts.
-Tax on onerous property transfer (ITP). This tax will be paid when buying a non new (second hand) property.
This tax is progressive depending on the purchase price or reference value. Starts in 8% up to 1%
If you want to know exactly how much tax you will pay for the purchase of a property in Mallorca but also a list of the other costs related to the purchase and the tenancy, you can use my free calculation service.