This article is to highlight a point that many people do not realise relating to the cost of buying a property in Mallorca. Overall the costs are higher than in the UK. Mostly they are made up of taxes, then there are legal costs and notary fees. In all we recommend you allow 10% on top of the final agreed purchase price in order to cater for these costs.
In addition to this, you should consider the future costs for if and when you come to sell the property i.e. the estate agent fees and capital gains tax. Estate agent fees are generally 5% or 6% of the sale price – again, a lot compared to the UK, but unavoidable if you want the best agents with the biggest client-base working to sell your property.
Specifically, all of the buying costs including taxes and legal costs can be offset against capital gains tax. So can the estate agent fees on sale of the property.
It is also possible to offset the costs of substantial home improvements. This would not apply to simple redecorating but an extension or refurbishment is likely to quality.
The capital gains tax rate for non residents is now the same as for residents at 18%, so more or less in line with the UK. All-in-all, if buying, selling and any improvement costs are offset against this as above, the cost of buying and selling property in Mallorca is probably about the same, or slightly less, than in the UK.
In order to do this it is essential that you keep invoices and receipts for all payments. This is also another reason to have good tax advisor as they will be able to tell you exactly which costs you can offset and which you cannot. They will stand far more chance of saving you money if you speak to them at the outset when you purchase your property rather than as an afterthought when you come to sell it.
≈ See more on tax advisors and accountants in Mallorca
≈ See more on the buying process and associated costs
≈ Capital gains tax in Mallorca
