Joan XXIII 90
Puerto Pollensa Mallorca
Phone: +34 971 86 77 00
Fax: +34 971 86 78 00
All what you need to know when buying property in Mallorca
Property purchase costs
7% TRANSFER TAX (I.T.P.) payable by the buyer for the purchase of any Real Estate (villas, flats, land, commercial premises, garages), provided the vendor is not a developer or normally trading in the business of resale properties.
8% (7% VAT and 1% STAMP DUTY) for any VILLA or APARTMENT, or GARAGE that is annexed to an apartment, where the vendor is a developer, promoter or habitual trader in these generally new properties.
17% (16% VAT and 1% STAMP DUTY) for PARCELS OF LAND, COMMERCIAL PREMISES or COMMERCIAL GARAGE SPACES, where the vendor is a developer, promoter or habitual trader. This covers virtually all NEWLY URBANIZED LAND PARCELS and NEWLY BUILT COMMERCIAL PREMISES. This only covers resale properties when the vendor falls into one of the above categories.
Notary fees and property registry inscription fees
Notary fees can cost up to approximately €1.750/£1,184 although the cost increases according to the number of pages or complexity of the title deed (e.g. transcription of statutes, payment in stages, property partially finished, etc.). As an example, an apartment costing €300,000/£202,118 will cost around €546/ £368 in notary fees, whilst a property costing €600,000/£404,236 will cost around €678/£457 in notary fees. Any higher than this amount, the fees go up marginally. The property registry inscription fees also depend on the complexity of the transaction. For example, fees for an apartment costing €600.000/£404,236 to be registered in the name of one person and purchased without a mortgage loan, will cost around €300/£202. For an apartment with the same sales price to be registered in the name of 2 persons and purchased with a mortgage loan, will cost around €800/£539.
This is an “added value” tax based upon the increase of the Town Hall index value of the land only, from the prior (vendor’s) purchase to the present sale. It is usually not a significant amount with respect to apartments or townhouses – less than €1000 for the most part for an apartment or townhouse which last changed hands five or six years ago – but can be more in the case of villas with a large tract of land.
This tax corresponds, by its nature, to the vendor who is responsible for its payment, unless otherwise negotiated. As there are several variable factors used in calculating this tax, especially the length of time of ownership of the property, the amount payable can vary substantially and should be verified before proceeding with the purchase.
The total official costs involved in purchasing property should be less than 8% if it is a resale property, or less than 9% if VAT is paid on the purchase price, plus lawyer´s fees.
PART 2 - Other costs involved in owning Spanish property
Local Rates or Annual Property Tax (IBI)
Local rates are payable annually, and are calculated from the cadastral or rateable value of the land assigned by the Spanish Tax Office. The cadastral value takes into account the value of the land plus the value of the building, according to type, location, and usage. Upon this value, each municipal Town Hall decides on the percentage to be charged in respect of local rates. In the case of Marbella, the formula applied is 0,9644% (for 2007) of the rateable value of the property, which is almost always far less than its true market value.
Examples: In 2006, a 2-bedroom apartment in the beachside complex of Marina Puente Romano which is in the heart of the "Golden Mile" paid rates in the range of €800 to €1.000 approximately (£539 to £674). A free standing, large beachside villa in the heart of the "Golden Mile" paid annual rates of approximately €2,800/£1,887
Rubbish collection & water rates (Basura) (Agua)
The rubbish collection rate is applied by the Town Hall according to the property and payable every 6 months. For an apartment in Marbella rubbish collection is approximately €162/£109 and a villa approximately €242/ £163 per year. Water consumption is calculated by the water meter consumption in cubic meters and is payable every 3 months. Payment can be made directly at the Town Hall or by bank with direct debit instructions.
Generally speaking, the Community of Co-Proprietors or Homeowners’ Association is a legal entity comprised exclusively of the owners of the apartments in a building, or villas on an estate. The purpose of the Community is to own and maintain the common elements of the building or estate in question, and each homeowner is obliged to participate in the expenses of the upkeep of the community areas and services on a prorated basis with the other owners. Usually, a homeowner’s percentage of the costs is fixed by the size of the apartment, or plot, divided by the total area of all the apartments or plots.
A budget for the annual community expenses is presented at the annual general meeting of the homeowners, and they or their authorized representatives must approve the budget by majority vote of those present at the meeting. Expenses can vary substantially according to the services provided, and normally include salary and social security of the hall porter, common garden maintenance, lift maintenance, repairs to common elements, rubbish collection, water for watering community gardens, electricity for lighting communal areas, insurance, security, and administration fees. The President of the community must, by law, own a property within the complex itself and is chosen by way of vote by the co-owners. The President has no remuneration for this role.
A typical 2 bedroom apartment in a building or area with a hall porter, swimming pool, and a small garden, could cost between €120/£81 to €300/£202 per month in community fees – but could go up to €600/£404 or more per month in a high luxury building with a large community staff and many services.
In the case of an individual villa in an estate of villas, community fees are often less since the private gardens and exteriors of such properties are generally not maintained by the community, and the community fees are limited to road and roadside garden maintenance, basic common service maintenance, and security.
A standard insurance cost for a €300,000/£204,118 apartment with contents valued at €48,000/£32,338 would be €395/£266 per year. One should note that in an apartment building, the Homeowners’ Association is required to insure the building for its reproduction cost. Therefore, the individual’s insurance policy for the apartment need not cover the entire value of the apartment, but only damages to the interior of the apartment, its contents, and third party liability. It is also advisable to insure the building at first risk in case the Community insurance is not comprehensive. For a villa with a reproduction value of €500,000/£336,863 with contents insured at €180,000/£121,270 the annual insurance would be in the area of €1,580/£1,065.
The upkeep of a private garden is essential to the maintenance of your property and its cost will, of course, depend on its size. As a rough guide, the hourly rate is about €16/£11. A full-time gardener on salary would cost in the area of €1.100/£742 per month, whilst a half-time salary would be in the area of €700/£472. Apartments and townhouses have the communal garden areas tended by a contracted gardener and the cost is included in your community fees. A villa on a plot of 2,500m2 might require a gardener a few hours a week. A large parcel of a full acre or more may require a half or full-time gardener. Social security is an additional cost to full time wages and runs in the area of 40% of the salary.
Cleaning service is generally available on a full-time salary or hourly basis. Full-time salaries range from €700/£472 to €900/£606 per month plus approximately €140/£94 per month social security contributions. Part time help is usually charged by the hour with rates varying from €9 to €12/ £6.6 to £8.
Electricity is billed bimonthly. Minimum rates are applicable whether you are in residence or not, and the minimum varies according to the amount of electricity your house could potentially use with all power and lights turned on. The minimum charge for an apartment might be between €24 and €36 / £16.17 and £24.25 per month. Charges for a villa are from about €60 to €90 /£41 to £60.6 per month, depending largely on the extent of the electrical installation. General usage is €0.08/5.4 pence per Kwh plus tax. All rates are exclusive of taxes.
With all the sunshine in Mallorca, you will nevertheless be using less lighting and heating than in a lot of other countries!
The telephone bill is also charged bimonthly. Standard rates vary according to the equipment installed, but can be in the region of €18.50 / £12.46 per month including a touch dial telephone. A 3-minute call (daytime business hours) to any European Union country, direct dial, presently costs about €0.69/46 pence (excluding VAT). Fixed line calls to mobile numbers are in the region of €0.16 per minute/10 pence per minute. There are many local and national telephone companies that can offer substantial savings to those who wish to spend some time studying the market. ADSL broadband services are available virtually anywhere and ADSL "packages" cost approximately €39/£26 per month (plus VAT), including all local and national calls to fixed lines.
PART 3 - Taxes
Some of the main taxes for non-residents in Spain include the following:
a) Municipal Added Value Tax (PlusValía): Please refer to Part 1 of this article ”Municipal Added Value Tax (Plus valía)”
b) Rates or Annual Property Tax (IBI): Please refer to Part 2 of this article ”Local rates or Annual Property Tax (IBI)”
c) Rubbish Tax (Basura) Please refer to Part 2 of this article ”Rubbish collection & water rates (Basura) (Agua)”
d) Wealth Tax (Impuesto de Patrimonio)
e) Income Tax (Impuesto sobre la Renta)
f) Capital Gains Tax (Impuesto sobre Ganancias Patrimoniales Inmobiliarias) and Retentions
d) WEALTH TAX
Non-residents must pay a WEALTH TAX on their assets in Spain. The amount of tax is determined based on the individual wealth. The cost price of the property is usually the basis for the calculation of the tax.
Here are two examples on how to use the tax table below:
If you have assets in Spain of €150.000/£102,000 you simply multiply this amount by 0.2% and find that the tax is €300/£202.
If you have assets, of, let us say, €240,405, the calculation is the following: On the first €167.129, you pay the fixed amount of €334,26. On the difference up to the total amount of your assets (€240,405), that is €73,276, you apply 0.3%, that is, €220. Added to the fixed payment, your total tax payment for wealth will be €554.
Non-residents are wise to appoint a fiscal representative to handle all tax matters relating to one's assets in Spain. Official notifications regarding your property will be delivered to your fiscal representative, which is highly advantageous to the foreign owner as it protects an owner from having his or her assets repossessed by the Inland Revenue due to non-payment of taxes, for example. In previous years, there were cases of non-residents coming to Spain only to find their properties had been embargoed and even sold over, all due to the fact that the owner had been officially notified at a local address and found to be absent! To contract a fiscal representative one need look no further than one's own lawyer who will refer you to his own tax consultant.
e) INCOME TAX
Non-residents who use their property themselves must also file for Income Tax and must pay tax for any income received in Spain at the flat rate of 24% (including real estate rental income) even if the income was received abroad. Every non-resident is assessed on income tax even if there is no real income (on the theory of derived benefit) at 24% of 2% of the rateable value of the property value (cadastral value), which is generally a fraction of a property’s market value. This tax is not applicable if the owner is leasing the property to third parties, but it is applicable with respect to the rental income received, which is taxable at 24%.
RESIDENTS in Spain must of course file Income Tax and declare the income they receive regardless of source. For tax purposes, one is considered a FISCAL RESIDENT if one resides in Spain over 183 days per calendar year, regardless of whether one is officially resident or not.
f) CAPITAL GAINS TAX and RETENTIONS
Since the beginning of 2007, capital gains tax for non-residents has been reduced from 35% to 18%, payable on profits earned on the difference of the property value between the year of purchase and the year of sale.
In the case of capital gains derived from the sale of property acquired prior to December 31, 1994, the new law distinguishes between the gains obtained before January 20, 2006 and those obtained after that date, wherein the capital gains tax of 18% is applied on the proportional time of the ownership from the date of purchase and the time elapsed since January 20, 2006 to the date of sale. In other words the part of the profit obtained from January 20, 2006 will be taxable proportionately to the number of days that elapsed between this date and the sale date, at a tax rate of 18%.
Capital gains tax for residents has also been modified, seeing an increase from 15% to 18% in 2007. The changes to the rates of capital gains tax for both residents and non-residents are due to the fact that the previous system was considered penal to non-residents.
Under the new law, all non-resident sellers, regardless of when they acquired the property, are subject to a 3% retention of the sales price, paid to the Tax Office by the purchaser on account of the seller, and applied against the seller´s capital gains tax.
PART 4 - Miscellaneous questions and answers
Q: What if I want to buy a plot and build my own home?
A. Providing that a building plot is situated within an urbanization, or an area zoned within the Municipal Plan for such use, outline planning permission will already have been granted for the construction of a detached home. However, building regulations, which vary considerably, dictate the permissible size of the villa according to the size of the plot. Care should therefore be taken before proceeding with the land purchase that one will be allowed to construct one’s chosen home on it. Panorama will be pleased to provide a list of bilingual architects, and to arrange viewings of some of their previous work.
Are technical surveys available?
A. A building survey, as it is understood in the U.K., is not necessary in Spain for mortgage purposes. It is nonetheless advisable when purchasing an older property. Common things to check for are the condition of the plumbing and electrical installations, waterproofing, roofing, and so on. These checks, as well as a full structural survey, can be carried out by a Spanish technical architect (aparejador) or indeed by a qualified British Chartered Surveyor. Any fees involved would be to the account of the prospective purchaser.
Is financing available?
A: Spanish banks are highly competitive when offering mortgages on both new properties and resale properties. It is now common practice for most Spanish banks to offer mortgages to non-residents, although some banks do offer a wider variety of financing packages than others. Common terms offered are mortgages from 5 to 15 years, often of up to 80% of the purchase price, at around 1 point over current EURIBOR rates. The applicant must of course qualify for the loan, especially from the standpoint of having sufficient income to afford the monthly payments, and the bank must appraise the property value. The appraised value, generally speaking, coincides with the market value of the property.
Who pays estate agency fees in the sale of a property?
A: The seller always pays agency fees, unless you come up with a different agreement with your agency. Although the seller remunerates his agency, the agent has an ethical obligation to see that the purchaser gets fair value for money, and at the end of the day, a good agent’s job is to bring the buyer and seller together in harmony. This highlights the importance of working with an established estate agency with a strong reputation. The agency also has an obligation to see that the title deed to the property is passed free of all liens and encumbrances. Panorama provides an exceptional after-sales “settling-in” service for its clients, totally free of charge, as part of general company policy.
How will I deal with standard bills, e.g. electricity, water, telephone, rates, etc.?
A: Frequently the administrator for the Community of Homeowners will settle these bills, but, if not, it is common practice in Spain to issue standing instructions to your bank to pay them on your behalf.
What is an urbanization?
A: An urbanization is a planned community which has met the standards of the various governmental agencies with respect of the use of the land (residential, commercial, sports area, green zones), and to providing a specific set of services and a minimum level of quality in the construction of roads, sidewalks, drainage, sewage systems, electricity and water installations, and so on. Obtaining permission to develop land into an urbanization can take a developer up to several years and several million euros of expense. The most obvious advantage to the owner of a property within an urbanization is the fact that the land usage is strictly controlled. If one decides to build a house on a plot in a section of an urbanization zoned exclusively for single-family dwellings, you are assured by law that neither an apartment block nor a rabbit farm can be located on the adjacent single-family plot!
Q: How long can I stay in Spain as a tourist?
A: Europeans from the E.U. can stay in Spain indefinitely. Visas are not required for some other countries such as the United States, but are still required in other cases, depending on one’s country of origin, and with varying lengths of stay permitted. Any non-resident residing in Spain 183 days or more per calendar year is considered by the Tax Office to be a resident for tax purposes.
Q: Where can I send my children to school?
A. There are several international schools in the mallorca here are the best ones:
Bellver International College
Founded in 1950, Bellver is the longest established, privately- owned British school in Spain. All pupils become bilingual in English and Spanish. French, German and Catalan are also offered. The school is an official examination centre for Cambridge & Edexcel.
Number of Students: 320
Waiting list: 390
Requirements: Entree exam at age 6 in English + other subjects
Address: C/ Josep Costa Ferrer, 5
Mrs. Muirhead / Mr. Longhurst
Tel. +34 971-401679
King Richard III College
This is an independent day school which provides a complete education to Year 13. Aside from English they teach Spanish, French and German. The school enjoys a privileged location on Mallorca, and is situated in the picturesque village of Portals Nous.
Number of Students: n/a
Waiting list: n/a
Requirements: Assessment test English and Mathematics
Address: C/ Oratorio, 4
07181 Portals Nous
Tel. +34 971 67 58 50
Baleares International School
This is an Independent Day School. Founded in 1957, BIS serves children from many countries. The medium of instruction is English, and the main educational programme follows the British National Curriculum.
Number of Students: n/a
Waiting list: 3 or 4 children per class
Requirements: Basic English
Address: C/ Cabo Mateu Coch,17
07015 San Agustin
Mr. Barrie Wiggins
Tel. +34 971 40 31 61
Queen’s College, Mallorca
Founded in 1977, Queen’s College now caters for some 315 children between the ages of three and eighteen, preparing them for GCSE and GCE ‘A’level examinations and equivalent qualifications in the Spanish education system.
Languages: English, French, German, Spanish, Catalan
Number of Students: 350
Waiting list: 300
Requirements: Basic knowledge in English
Address: C/ Juan de Saridakis 64,
07015 Palma de Mallorca
Tel. +34 971 401011
Founded in 1985 as a Preparatory School, it has now over 150 pupils whose ages range from 3 to 14 years.
Languages: English, Spanish, Catalan, German
Number of Students: 200
Waiting list: for the lower classes
Requirements: Assesssment test in all subjects
Address: Camí de Son Ametler Vell Marratxi
Tel: (34) 971 605008
Deutsche Internationale Schule Mallorca
The German College Mallorca has an international trend and follows the German National Curriculum up to year 9.
Languages: German, English, French, Spanish.
Number of Students: 60
Waiting list: no
Requirements: Entry interview
Address: Avda. de Las Palmeras, 14
E - 07181 Magaluf
Tel: +34 971 13 25 14
Eurocampus Deutsche Schule Mallorca
This German College forms in cooperation with the Scandinavian College the Eurocampus. About 100 pupils of both schools share some of the subjects. Besides German they teach Spanish, Catalan, English and French.
Number of Students: 47
Waiting list: no
Requirements: Entry Interview
Address: Carrer de la Infanta, 15
07014 Palma de Mallorca
Telefon (0034) 971 676 322
The Swedish School on Mallorca
This private college is supported by the Scandinavian government and provides a complete education from nursery to year 13. Besides Swedish they teach Norwegian, Spanish and English.
Number of Students: 50
Waiting list: no
Requirements: knowledge of swedish language
Address: C/ Salud, 19
E - 07014 Palma de Mallorca
Tel: 971 28 23 50
Q: Are there medical and health insurance facilities?
Private medical insurance is available through various groups such as SANITAS. This could cost from €30/£20.3 to €130/£87.8 per person per month, depending on their age and the state of their health. Spain's social security system now allows E.U. residents access to the health network via a special form (E-101). For residents who are self-employed, own a company, or are employees, your social security contributions automatically entitle access to the Spanish health network.
© 2007 Christopher Clover