Taxes when buying a property in the Balearic Islands When buying a property in the Balearic Islands, it is important to know the taxes that must be paid. Depending on the type of transaction, you may be subject to Value Added Tax (VAT) or Transfer Tax (ITP). In addition, there are other expenses related to the purchase that should be considered.

What taxes do you have to pay when buying a luxury property in Mallorca?

If you are looking to buy a luxury property in Mallorca, it is important that you understand the taxes and costs associated with this transaction. In this article, we will go over the taxes and additional costs that you should be aware of when buying a luxury property in Mallorca.

Taxes when buying a property in Mallorca

Depending on the type of transaction, you may be subject to Value Added Tax (VAT) or Transfer Tax (ITP).

Newly built properties are subject to the reduced VAT of 10%, while other transactions, such as the purchase of land or premises, are subject to the full VAT of 21%.

As for the ITP, this tax varies depending on the purchase price. In the Balearic Islands, the tax rates are as follows:

Up to 400.000 €: 8%.

400.000,01 € - 600.000 €: 9%

600.000,01 € - 1.000.000 €: 10%

1.000.000,01 € - 2.000.000 €: 12%

2.000.000,01 € and above: 13%.

Other costs associated with the purchase of a luxury property in Mallorca

In addition to taxes, there are other costs associated with buying a property in the Balearic Islands. These include:

• Stamp duty (Impuesto sobre Actos Jurídicos Documentados por contrato de compraventa notarial): 2% of the purchase price.

• Lawyer's fees: 0.5% - 1% of the purchase price plus VAT.

• Notary fees: approximately 0.3% of the purchase price.

• Land registry: approximately 0.25% of the purchase price.

• Gestoría: between 200 € and 1.000 €.

Annual taxes to consider

On the other hand, there are annual taxes to be paid as an owner of a property in the Balearic Islands. These are:

Real Estate Tax (IBI): levied by the municipality on the cadastral value of the property and is usually between 0.3% and 0.4% of the cadastral value.

Income Tax: if it is a resident owner, 50% of the rental income is taxed. If it is a non-resident owner, the tax rate is a flat 24.75%. In both cases, expenses are deductible. In addition, if the owner does not use the property as his main residence, a notional annual rent of 1.1% of the cadastral value is attributed to him.

Conclusion

When buying a luxury property in Mallorca, it is important to take into account the additional taxes and expenses associated with the transaction. In addition to taxes, there are also costs related to the purchase and maintenance of the property that need to be considered. We hope you have found this information useful. If you would like to find out more details about taxes when buying a luxury property in Mallorca, you can download our free guide below.