Property Law & Taxes in Mallorca - A Comprehensive Guide

Welcome to our definitive guide on property law and taxes in Mallorca. This beautiful Mediterranean island has long been a popular destination for those looking to invest in a holiday home or permanent residence. However, navigating the complex legal and tax system can be daunting. This comprehensive guide will provide you with essential information, ensuring a smooth and hassle-free property purchase process.

Section 1: Property Law in Mallorca

1.1 Legal framework: In Spain, property law is governed by the Civil Code, the Mortgage Law, and specific regional legislation. In Mallorca, the Balearic Island's regional legislation applies, which may have some differences from mainland Spain. It is crucial to work with a qualified lawyer familiar with local regulations to avoid any legal pitfalls.

1.2 Notary and Land Registry: In Mallorca, the notary plays a vital role in the property purchase process. The notary ensures that all necessary paperwork is in order and that the buyer and seller's rights are protected. After signing the deed, the property transfer is registered with the Land Registry, which is essential to establish legal ownership.

1.3 Due diligence: When purchasing a property in Mallorca, it's vital to carry out thorough due diligence. This includes verifying the property's legal status, checking for outstanding debts, and ensuring that all necessary permits and licenses are in place.

Section 2: Taxes and Fees in Mallorca

2.1 Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales, or ITP): When buying a resale property in Mallorca, you will be required to pay the Property Transfer Tax, which ranges from 8% to 11% depending on the property's value. For new properties, you will pay VAT (IVA) at 10% and a 1.2% Stamp Duty (AJD) instead.

2.2 Capital Gains Tax (Impuesto sobre la Renta de las Personas Físicas, or IRPF): When selling a property in Mallorca, you may be subject to Capital Gains Tax on the profit made from the sale. The tax rate varies depending on your residency status and the length of time you have owned the property. Tax exemptions and reductions may apply in certain circumstances.

2.3 Annual Property Taxes: Property owners in Mallorca must pay annual property taxes, including the Real Estate Tax (IBI) and the Non-Resident Income Tax (IRNR). The IBI is a local tax based on the property's cadastral value, while the IRNR is a national tax paid by non-residents on their property's income-generating capacity.

2.4 Other taxes and fees: Additional costs associated with property ownership in Mallorca include the Wealth Tax (Impuesto sobre el Patrimonio), which applies to high-value assets, and the annual rubbish collection tax (Tasa de Basuras).

Section 3: Conclusion

Understanding the property law and taxes in Mallorca is essential for a successful investment. It is highly recommended to work with experienced professionals, including a lawyer, tax advisor, and estate agent, to ensure a seamless property transaction. By staying informed and following the proper procedures, you can enjoy your dream property in the beautiful island of Mallorca without any legal or financial concerns.