Buying a property in Mallorca is an exciting step that should be carefully planned – especially with regard to tax aspects. From choosing the right property and checking the legal and tax framework to the final transaction, there are numerous points to consider. In this tax guide, you will learn everything you need to know about the purchase process and the resulting tax charges.
After the viewings and agreement on a purchase price, the buyer usually commissions a lawyer to draw up a private-law option contract for the binding reservation of the property.
The lawyer draws up an option contract and secures the purchase or sale for the contracting parties with a down payment of 10% of the purchase price, usually into a notary’s escrow account. The option contract is signed by both parties.
This contract under private law can be sent by e-mail or fax. You therefore do not have to be in Mallorca to sign it. The transfer to the notary’s escrow account makes the contract effective. In the following 4-6 weeks the buyer has time to check all the documents of the property and make all the arrangements for the purchase. This includes applying for and obtaining a Spanish tax number, the so-called NIE number. You should always apply for the NIE number as early as possible for all persons who are to become owners or part-owners of the property in Mallorca upon purchase. We are happy to offer our help and make this administrative process as easy as possible for you.
Possible financing is also finalized during this period. We can also assist with financing with German-speaking contacts. For the down payment and the subsequent final payment of the purchase price, we recommend that bank transfers are made via the notary’s escrow account. Talk to your bank in advance before transferring a large sum to avoid high bank charges.
The costs for a lawyer, the notary’s office, the land registry and the so-called Gestoria, which is commissioned to make the entry in the register, are based on the purchase price and amount to approx. 2% of the purchase price.
We will accompany you to the notary on the day of the notarization. All buyers will need their valid ID and NIE number for this appointment. The full purchase price, including taxes and additional costs, must be transferred to the notary in good time for the notary appointment. With the signatures of the buyer and seller and after the notary has made the necessary payments, you immediately become the owner, receive the keys and can dispose of the property. Be sure to read the points “Services for your property” below and think about insurance in good time.
One-off taxes when buying a property
The largest part of the incidental purchase costs are mainly property transfer taxes (ITP), which are incurred for second-hand properties and are staggered as follows:
the first €400,000 of the purchase price is taxed at 8% ITP
between €400,000.01 and €600,000, 9% ITP is charged
between € 600,000.01 and € 1,000,000, 10% ITP is charged
between €1,000,000.01 and €2,000,000, 12% ITP is charged
A purchase price value over € 2,000,000.01 is taxed at 13%.
In this case, the partial value is calculated at the tax rate and not the total sum at the maximum rate.
The real estate transfer tax must be paid within 30 days of notarization. As a rule, the Gestoria or the local tax consultant is commissioned to do this.
In the case of new buildings for first occupation (obra nueva), the reduced sales tax is applied instead of the property tax. This is 10% plus 1.5% registration fees (2% if the purchase price is over one million).
When purchasing land or unfinished buildings from a taxable company, the regular Spanish VAT of 21% applies, which is then fully deductible for the buyer if the company is also a taxable company.
Only one of the taxes is due on each purchase!
The property tax in Mallorca, also known as Impuesto sobre Bienes Inmuebles (IBI), is levied by the local municipalities and varies depending on the location and type of property. In most municipalities, the tax is due once a year and payment is usually made between September and November. The IBI is calculated on the cadastral value of the property, which is usually much lower than the market value. The IBI rate is typically between 0.4% and 1.1% of the cadastral value, depending on whether the area is urban or rural and in which municipality the property is located.
In Palma de Mallorca, the capital of the island, the IBI rate is around 0.9% for urban properties. Rural areas may have lower rates, while highly developed tourist areas may have higher rates. In the event of a sale, the property tax is shared pro rata temporis between the buyer and seller from the date of the notary’s appointment.
As a rule, non-residents use their vacation property themselves. The Spanish tax authorities regard this self-use as fictitious rental income and tax this at 19% on 1.1% of the cadastral value.
If you rent out your property in Mallorca, the income is taxed at 19%. All costs in connection with the property rental are fully deductible.
Garbage fees in Mallorca are levied by the local municipalities and vary depending on where you live, the type of property and the service provided. These fees cover the costs of waste collection, waste recycling and street cleaning.
In Palma de Mallorca, for example, the waste fees depend on the size of the property. For private households, annual fees can average between 150 and 200 euros, while commercial properties pay higher fees depending on the type and size of the business.
Garbage fees are usually collected once a year together with the property tax (IBI)
Electricity costs on Mallorca vary depending on consumption, provider and tariff, but are generally somewhat higher than on the Spanish mainland due to the island location. On average, electricity for private households in Mallorca costs around €0.25 to €0.30 per kilowatt hour (kWh).
In addition, Spain has a two-tier tariff system in which the price of electricity varies at different times of the day:
Peak consumption times (Punta): these fall during peak times and are more expensive.
Off-peak consumption times (Valle): These apply at night and at weekends, where prices are significantly lower.
Monthly electricity bills in Mallorca can vary greatly depending on whether air conditioning or heating appliances are used frequently. On average, the monthly electricity costs for an average household in Mallorca amount to around 60 to 120 euros, but can be higher in the summer months due to the increased use of air conditioning.
There are various providers on the island, including Endesa, the largest supplier, and alternative providers such as Iberdrola or Holaluz, which offer different tariffs.
For homeowners, photovoltaic systems are a very good way to reduce electricity costs and make ecological sense. In conjunction with a heat pump or air conditioning system, heating or air conditioning can be provided almost free of charge. There are always varying subsidy programs through which you can receive a considerable proportion of the retrofitting, renovation or modernization costs for a photovoltaic system, insulation or better windows. Ask us, we will be happy to help you.
Water consumption costs on Mallorca vary greatly depending on the region, water consumption and the respective water supplier. In general, the cost of drinking water on the island is between 0.60 and 5.76 euros per cubic meter. In addition, depending on the municipality and type of property, different basic fees and wastewater charges may apply.
Typically, there is a basic charge (cuota fija), which is independent of consumption, and a consumption-based charge (cuota variable), which is calculated according to actual water consumption. The prices increase progressively, which means that the cost per cubic meter of water also increases with higher consumption.
An average household in Mallorca pays around 30 to 70 euros a month for water, although heavy water consumption, e.g. for watering the garden or a pool, can significantly increase the cost.
In Mallorca you can find good internet tariffs between €20-30 per month. This usually includes landline telephony and sometimes also a mobile tariff. Coverage in urban areas is very good. Fiber optic internet is often available thanks to the unattractive but simple cabling on the facades of houses. In rural areas, there is antenna or satellite-based Internet, which also comes close to the speed of a fiber optic connection. Mobile phone tariffs are also very cheap and good tariffs are available for as little as €5.
A standard alarm system, including installation and connection to the security service, costs around €60 per month. With window and door sensors and cameras, your home is well protected. We are often asked whether Mallorca is very unsafe and whether apartments or houses are frequently broken into or occupied. In recent years, we have never heard of a direct incident of burglary or squatting among our customers or acquaintances. The few cases of squatting are always sensationalized by the media. Squatters are looking for properties where they can stay longer with their families, which is why they tend to occupy ruins and abandoned houses in small numbers. In Mallorca and throughout Spain, there are specific laws that regulate squatting (okupación). An important detail is the often-mentioned 48-hour rule, which states that homeowners can notify the police and have squatters removed from the building within the first 48 hours of an illegal occupation. If this happens within this period, it is usually a trespassing offense and the police can intervene quickly.
KUNZE & PARTNER is happy to help with all issues relating to the purchase, furnishing and equipping and day-to-day life with a property in Mallorca. We can make recommendations for a lawyer, help with financing issues and bring in experienced partners and help with applying for a Spanish tax number and opening a bank account. We can also get your property “up and running” with all utilities, gas, electricity, water, internet and insurance and all the services you need.
Our strength is to search for the right property on behalf of our clients throughout the island. Please contact us and give us your non-binding and free search request. We cooperate with other real estate agencies, so we can offer you any property on Mallorca. However, having just one contact person makes the search and coordination of appointments much easier.
We also specialize in the sale of plots of land for development, owner-occupation or as an investment. Our network provides you with the best architects and project teams and the most capable construction companies for the construction of your dream property or for the success of your investment.
Ihr Ansprechpartner:
Bernd Kunze
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+34 871 003 809
Schreiben Sie uns
info@kunze-partner.com
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+34 673 551 943
Kunze & Partner
Carrer de Sant Feliu 14
07012 Palma
Tel. +34 871 003 809
E-Mail: info@kunze-partner.com
Registernummer: GOIBE815123/2024
Your Contact Partner:
Bernd Kunze
Give us a call
+34 871 003 809
Write to us
info@kunze-partner.com
Contact us on WhatsApp
+34 673 551 943
Kunze & Partner
Carrer de Sant Feliu 14
07012 Palma
Tel. +34 871 003 809
E-Mail: info@kunze-partner.com
Register: GOIBE815123/2024
Su persona de contacto:
Bernd Kunze
Kunze & Partner
Carrer de Sant Feliu 14
07012 Palma
Tel. +34 871 003 809
correo electrónico: info@kunze-partner.com
Número de registro: GOIBE815123/2024
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