Mallorca properties for sale

Buying property in Mallorca

When buying a property on Mallorca or in Spain in general, there are some differences to the German system, from taxes on incidental costs at purchase, to contract design. Here we give you some information you need when buying a property in Spain.

As a result of the financial crisis, Spain's real estate market has become even more popular with German investors. In any case, Germans are also very keen to invest in Mallorca, and the drastic drop in prices in certain segments and the sometimes prevailing oversupply have recently increased the desire to buy. But it doesn't make sense to buy all over the island. We will show you briefly the price structure, which differences to German law you have to pay attention to and what the current tax situation is.

Who is allowed to buy real estate on Mallorca?

EU citizens have the same rights as all Spaniards in Spain and therefore also in Mallorca, which means that there are no restrictions on the purchase of real estate. So you can buy anywhere in Spain - the Spanish Constitution of course guarantees the protection of your property.

How is the taxation? Value added tax and real estate transfer tax on real estate purchases

IVA, Spanish value added tax, is levied on initial purchase (new construction, also by the developer) and on the purchase of building plots. There are different tax rates of between ten percent for apartments/houses and, for example, 21% for commercial real estate on the purchase price. If the buyer is a natural person, the real estate transfer tax is payable. On Mallorca this was 7% until 1 January 2013. Since that date, it has been staggered as follows: up to €400,000: 8%, up to 600,000 € 9%, up to 1,000,000 € 10% and over 1,000,000 € 11%. It is not compatible with VAT (or, for example, with IGIC in the Canary Islands). In addition to the value added tax, there is the notarization tax (Actos Jurídicos Documentados, AJD) amounting to 1.2 percent of the building value. This is transferred directly to the Balearic Islands. The regulations in Spain change very often and are subject to frequent updates.

It is imperative that you make the purchase accompanied by a specialist local lawyer.

Tax declaration in Mallorca

As the owner, you must not forget the annual tax return to the Spanish tax office. A distinction is made here in individual cases as to whether the limited or unlimited tax liability is applied. If you stay more than 183 days per year in Mallorca, you are subject to unlimited tax liability. You must then be assessed with all your income and assets in Spain. Here, attention must also be paid to the double taxation agreement between Germany and Spain. As already mentioned, it is very useful to consult an expert, for example a lawyer, about the many aspects.

What about the different property prices in the different regions of Majorca?

The price differences are very large, most price-intensive, because most popular, are the classic regions for holiday homes in the southwest, Alcudia and Can Picafort. Other places with a high investor share are Magaluf, Cala Millor, Playa de Palma and of course Palma. In recent times, the southeast is one of the more popular investment destinations with many new real estate offers. After the real estate bubble burst, real estate prices for residential properties below the luxury segment in Spain also fell sharply for the time being, but have now stabilized again. While there is a three-room apartment in the best location at prices starting at 400,000 euros, the price for a comparable property in the centre of the island or the Tramuntana region is around 30% lower. Here you will find beautiful new apartments starting at 250,000 euros. As you can see, it depends very much on the region in which demand is at its highest.

What you must take into account when buying your property

In order to legitimise yourself for the sale of a property, your contractual partner must present a notarised purchase contract with an entry made by the land registry office. Alternatively, they can also prove their ownership by means of a current extract from the land register. This includes the cadastre reference. Caution should be exercised in the case of verbal agreements - in Spain, contracts concluded verbally may also be valid. So always clarify in advance whether the owner alone is entitled to dispose or whether the spouse must agree. If the undersigned is not the owner, he or she must present a power of attorney that allows him or her to make the sale on his or her behalf.

Check any encumbrances on the property, the quality of the building land, municipal development plans and existing rental and lease agreements. Check the amount of property tax to be paid on the basis of a payment receipt - preferably the last 5 years, then you are on the safe side that this has also been paid. If the real estate is subject to the residential property law you should, as in Germany, have the apportionment arrears documented. If you buy a plot of land with a house, the house should also be registered in the land register. A habitation certificate shows you whether the supply of electricity and water is properly regulated. Also insist on immediate registration as owner in the land register in the case of installment payments and conclude the purchase contract with notarisation by a notary. Include the "incidental costs" of the real estate acquisition in the calculation. These include notary, land registry office and lawyer (together about 3 - 4 % of the notarial purchase price). In addition, there is the real estate transfer tax and value-added tax. When buying a property in Spain from a non-resident seller, it must be clarified before the full payment of the purchase price whether the withholding of 3% must be made.

Insist on individual agreements, although this sometimes creates some tension in the purchase negotiations, but you can often achieve a better result for you. Submitted form contracts are usually designed for the benefit of the contracting partner who designed them - so feel free to get involved with your ideas. In doing so, you should also have unimportant assurances and points, which you take for granted, confirmed in writing. Always agree in the contract which legal form is to be used. In addition should be regulated, which guarantees are ordered, in order to implement the agreed upon if necessary before court. This way you are on the safe side when buying a property if the worst comes to the worst.