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 taxes that will be applied to your property purchase differ according to whether it is a new property or a resale. “New” is defined as a property bought from the original developer.
New properties – I.V.A.
If you are buying a new property, it will attract “Impuesto sobre el valor anadido” or IVA, the Spanish equivalent of VAT. This is currently set at 10% of the purchase price.
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
If you are buying a resale properties, it will attract Impuesto sobre transmisiones patrimoniales (ITP). This tax is set in three bands:
- 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%
Tax is levied at the applicable rate in each band. E.g. for the 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
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. Lawyers 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. This is to cover the bank valuation and arrangement fees.
These costs are outside of the 10-13% allowance detailed above. Ensure your bank confirms the mortgage arrangement costs prior to agreeing the mortgage. Also bear in mind that it is sometimes possible to negotiate them.
Key steps in the
Surveyors and architects