BUYING IN THE BALEARICS
As you would expect, the islands come under the same broad scope of law as Spain when it comes to buying property on the islands.
However , the Balearic Government also has its own authority, including making policy decisions over issues such as tourist taxes and the licensing regime governing areas including holiday lets.
As you would expect, Spain has a well-established mechanism for buying property.
- If you’re an EU citizen, buying is straightforward. If you are not, check whether certain restrictions apply to you (such as the time you can spend in Spain).
- All property transactions in Spain are overseen by a Notary. He/she is there to validate the paperwork, check all necessary taxes are paid and register the property with the Spanish Land Registry. However, it is not the Notary’s role to give you legal advice or represent you.
- Appoint a fully independent lawyer who speaks your language as well as Spanish, and who has no connection to the selling parties. The local town hall, the nearest British Embassy or online research can help you find one. Your lawyer will check that you are buying from the legal owner; whether there are existing mortgages on the property; if it complies with building regulations; and if there are developments that might affect you.
In addition to the purchase price, buyers should allow a further 10-15% for additional fees and taxes. These may include:
- Your proportion of the Notary’s fees, according to a tariff set by law. Allow for a sum of 0.5% – 1% of the price declared in the deeds.
- The fees of your ‘abogado’ (your own lawyer). These will depend on the complexity of the purchase, but €1500 - €3000 is a guide figure.
- The Land Registry fee of around 1% of the sale value.
A local capital gains tax, reflecting the gain in value of the property when it is sold, is paid by the seller. However, if that seller is non-resident in Spain and fails to pay it, be aware that the burden can fall on you as the buyer.
Routine costs and charges of owning a property in the Balearic Islands include:
- A property ownership tax (the ImpuestoSobreBienesInmuebles (IBI)). This local tax is charged at between 0.4% and 1.1% of the valorcatastral. The good news is that this is based on the administrative value of the property, which is frequently lower than the market value.
- A wealth tax. For non-residents, there is a tax to pay on assets you own in the country. This starts above a threshold of €700,000 per person.
- Personal Income tax. If you’re a non-resident and you don’t receive rental or any other income in Spain, you pay one-quarter of the 2% of the valorcatastral. If you are a landlord, allow a tax bill of about 25% of the gross income.
If and when you come to sell, Capital Gains Tax (Impuesto de Plusvalia) will apply. At the time of writing, this stood at 19%.
Please note: This article reflects Aylesford’s current understanding of property legislation in Spain and the Balearic Islands. It is offered for general guidance only; specialist legal and tax advice should always be taken for any property transaction.