Apartments for sale in Mallorca

Buying an apartment in Mallorca: Info & Tips

Condominiums, Soller
Condominiums and apartments in Port de Soller

Buying an apartment in Mallorca can be attractive for many reasons. Whether you intend to use the property for your own permanent or temporary use, or whether you are thinking of renting it out as a holiday home. With your own apartment, you are independent, have more design freedom than with a rental property and possess a long-term and secure financial investment. As an EU citizen, you also enjoy the same rights as Spanish citizens when buying property in Spain.

But when buying an apartment, there are also some aspects to consider, both with regard to a new apartment and when buying a second-hand property. The purchase process involves additional one-off and regular costs as well as obligations and risks that need to be clarified in detail so that the fulfilment of the dream of owning a home does not become a nightmare. Here are some points you should be aware of before you buy.

What is generally to consider when buying an apartment?

One reason for buying an apartment may be expected lower costs than in the case of a rented apartment. Here, however, it is important to find out in advance exactly e.g. about Spanish tax law and the expected costs as well as the house money. If you are buying from a private seller, also check the seller's right of disposal and make sure that there are no tax liabilities.

Insist equally on an individual contract instead of a form contract and invest in a notary to draw up a notarial sales contract (escritura pública de compraventa) in which all agreements are recorded in detail. Clarify your obligations as the owner as well as any special rights of use, e.g. with regard to the cellar, storage rooms, garden and above all the roof terrace, because the latter is often used as a sales argument, but is "only" a communal terrace. If you have not yet applied for a Spanish tax number (número de identificación fiscal, NIF for short), do so in good time, as Spanish tax law requires you to submit your tax returns independently and on time. In addition, the NIF is required for the correct land register entry.

Before purchase: A look at the land register and cadastre

When buying both a new and a second-hand condominium, it is essential to check the registration in the land register (registro de la propiedad) and its reference at the land registry office (referencia catastral) and to compare it with the actual circumstances. Here it is important to know that the land registry and the land registry are separate institutions in Spain. Accordingly, the existing entries can also differ from one another and have different current values, so you should always check both.

The land register entry is not only helpful for the acquisition of entire properties, but also for the purchase of apartments. It must be checked whether the living space is correctly indicated and whether debts or charges may have been entered for the property in question. These can be an indication of matters that must be clarified before the contract is signed, so that you as the purchaser are not later held liable for entries for which the previous owner is responsible.

The entry of the title of ownership in the land register also provides additional legal certainty and is the official proof that you are the owner of the apartment when reselling the apartment. The information in the cadastre, for example, serves as the basis for the annual property and income tax to be paid, so it is definitely appropriate to be in the picture here. If corrections and adjustments are to be made to the entries, it is also advisable to arrange for this in good time and, if possible, to place the responsibility with the seller.

Purchase of a new apartment

The quality of the building fabric and modern equipment can be decisive advantages of a new apartment. If for these reasons you want to buy such a residential property, you should in any case inform yourself in advance about a valid building acceptance - granted by the responsible municipality - as well as a habitability certificate. If a community of owners is involved, you should inform yourself about possible obligations as an owner of the community and make sure if and what costs you will incur from this direction.

As a rule, you will purchase a new apartment from a property developer or a commercial company that acts as a legal entity. In this context, Spanish VAT (impuesto sobre el valor añadido, IVA for short) is due. The rate for condominiums has been 10% since the tax rate was adjusted in 2012. Attention: Residential properties that have not yet been completed - just like building plots, by the way - are even taxed with 21% IVA. This tax is levied centrally and must be paid to the central tax office accordingly.

Buying a second-hand apartment

Quiet garden apartment with private pool in Palma
Rarity: Garden apartment with private pool in Palma

Older condominiums are sometimes found in more attractive and central residential areas than newly built properties. However, there are also a few points to consider here. Especially when buying an older condominium, i.e. a second-hand purchase, the seller will very often be a natural person. Then, instead of the already mentioned value added tax IVA, the real estate transfer tax (impuesto sobre transmisiones patrimoniales, or ITP for short) is due. Unlike the IVA, it is a regional levy, the level of which is determined by the autonomous regions of Spain and may vary accordingly. The Balearic Islands are currently staggered. Depending on the assumed market value of the property (i.e. not the purchase price!), the real estate transfer tax is between 8 and 10 %.

Moreover, the rule of thumb is: IVA and real estate transfer tax are never charged simultaneously, but are mutually exclusive. In any case, it must be clarified in advance which of the two taxes is to be paid with the respective purchase so that this can also be paid to the correct tax office in due time.

When buying a flat: one-off taxes and costs

In addition to the value-added or real estate transfer tax already mentioned, there are a number of other one-off taxes that must be taken into account as additional costs when buying a flat.

Particular care must be taken with the capital gains tax (impuesto municipal sobre el incremento del valor de los terrenos de naturaleza urbana, or plusvalía for short). This tax is calculated from a number of parameters such as the duration of the previous possession, the land value and the number of inhabitants of the responsible municipality. In principle, plusvalía is to be borne by the seller - this is legally stipulated as such! However, it is often attempted to transfer this payment to the real estate buyer in the purchase contract. That is why this should in any case be clearly formulated in the Treaty. However, if you agree with the seller that you will take over the payment of plusvalía, then have its amount calculated in good time before signing and notarising the contract in order to avoid any nasty surprises.

When buying a new apartment, on which IVA must be paid, the stamp duty (impuesto sobre actos jurídicos documentados, AJD for short) is usually also payable. In Mallorca, it amounts to 1.2% of the value of the property and is transferred regionally, i.e. in this case to the Balearic Islands as an autonomous region of Spain.

In addition, when buying an apartment, the corresponding registration fees as well as the fee for the lawyer and notary who certifies the purchase contract are of course also incurred.

Annual taxes after the purchase of an apartment

If you own residential property in Spain, you will have to pay annual taxes. Details also depend on whether you are resident, i.e. spend more than 183 days per calendar year in Spain, and have your economic focus or spouse and/or dependent children in Spain. In this case you are subject to the so-called unlimited tax liability.

When you own your condominium, you must pay annual income tax (impuesto sobre la renta de personas físicas, IRPF for short). The amount of this tax is based on the cadastral value - a notional value in use of currently 2% of the cadastral value serves as the basis on which 24.75% income tax is payable. This is another reason why it is important to find out about the registered cadastral value.

If you rent out your residential property, income tax is also due. However, part of the rent may be exempt from taxation, depending on the case. It is worth taking the advice of an expert.

In addition, wealth tax (impuesto sobre el patrimonio) is payable, which is calculated in stages on the basis of the purchase price of the property. The municipality also collects the land tax (impuesto sobre bienes inmuebles IBI), the amount of which - as already mentioned - is calculated according to the cadastral value.