Property purchase taxes and other costs

Property-purchase-costs-in-Mallorca

Depending the price of the property you should make an allowance of 11-13% of the purchase price to cover taxes and other costs associated with buying your property.

This excludes mortgage arrangement fees which should be calculated separately.

The costs are made up as follows:

Taxes

The taxes that will be applied to your property purchase differ according to whether it is a new property (bought new from a developer) or a resale property (property that is not for sale from the original developer).

New properties – I.V.A.

Purchases of new properties attract Impuesto sobre el valor anadido or IVA, the Spanish equivalent of VAT. This is currently set at 10% of the purchase price.

Purchases of new properties also require payment of JD (Stamp Duty), a document tax or stamp duty, currently 1.2% of the purchase price.

Resale properties – ITP

Resale properties attract Impuesto sobre transmisiones patrimoniales (ITP). This tax has been revised from 2013 as follows:

  • Amount payable on purchase price up to 400.000 Euros – 8%
  • Amount payable from 400.001 to 600.000 – 9%
  • Amount payable from 600.001 upward – 10%

Contrary to the previous system, you will now pay tax at the applicable rate in each band.

Example for purchase of a house for 525.000 Euros.

– 8% on 400.000 Euros = 32.000 Euros.
– 9% on 125.000 Euros = 11.250,00 Euros.

TOTAL: 32.000,00 + 11.250,00 = 43.250,00 Euros

Legal costs

Your legal costs should be covered within the overall allowance outlined above unless it is an unusually complex conveyance.

  • Notary fees.These vary depending on the value of the property.
  • Land Registry fees.These are basically administrative fees and are not significant. They vary according to the locality, type and value of the property.
  • Lawyers fees. Lawyer in Mallorca generally charge between 1% and 1.5% of the purchase cost.

Mortgage arrangement costs

If you are taking a mortgage you should allow for the arrangement costs which are higher than in the UK and some other countries. To be on the safe side allow 3% of the amount you will be borrowing to cover the bank valuation and arrangement fees.

These costs are outside of the 10-13% allowance detailed above. The bank should confirm the mortgage arrangement costs prior to agreeing the mortgage and this amount can sometimes be negotiated.


Also see: