Additional Purchase Costs and Taxes – Your Comprehensive Guide to Real Estate Acquisition in Mallorca 2024

Discover all about additional purchase costs, ongoing expenses, and essential post-purchase steps for your property in Mallorca, including expert advice to optimally prepare you for the purchase.

1. Introduction

Welcome to our blog at “Luxury on Mallorca” – your expert in exclusive properties on this paradise island. Acquiring a property is an exciting endeavor that requires careful planning and knowledge. Mallorca offers an impressive variety of properties in stunning locations, but the purchase process can be complex, especially when it comes to associated costs. In this blog post, we aim to provide you with a comprehensive overview of all expenses related to purchasing a property in Mallorca. Our goal is to offer you valuable insights and information to make an informed buying decision.

In addition to the purchase price, there are numerous additional costs and taxes that are often overlooked but can constitute a significant part of your total investment. Furthermore, it is important to be aware of ongoing costs that will be incurred after the purchase. From property taxes to insurance and maintenance, we cover all relevant topics to prepare you thoroughly for acquiring your dream property in Mallorca.

Our objective is to equip you, as a buyer, with the necessary knowledge to make the purchase process as transparent and understandable as possible. Armed with this knowledge, you can avoid unexpected surprises and focus on what truly matters – enjoying your new home on the sunny island of Mallorca. Let’s embark on this journey together and discover what you should consider when buying real estate.

2. Purchase Costs and Taxes When Buying Property in Mallorca (2024)

The acquisition of real estate in Mallorca is a significant investment. In addition to the purchase price, various ancillary costs and taxes should be considered in financial planning. Here’s an overview of the key expenses, based on the latest information for the year 2024:

Property Transfer Tax (ITP – Impuesto sobre Transmisiones Patrimoniales)

• For the purchase of used properties:
  • Up to 400,000 EUR: 8%
  • 400,001 to 600,000 EUR: 9%
  • 600,001 to 1,000,000 EUR: 10%
  • 1,000,001 to 2,000,000 EUR: 12%
  • Over 2,000,000 EUR: 13%

Value Added Tax (IVA) and Notary Tax (AJD)

• For new buildings purchased directly from the developer:
  • Value Added Tax (IVA): 10% for residential properties, 21% for commercial properties and land
  • Notary Tax (AJD): Typically 1.5% of the purchase price

Notary and Land Registry Fees

• Dependent on the purchase price, usually around 1% of the purchase price
• Fees for registration in the land registry: Between 350 and 500 EUR

Legal Fees

• We collaborate with experienced and competent lawyers who can advise you in your own language and assist throughout the purchase process. This provides valuable support for reviewing and clarifying all legal aspects of the purchase. The cost of this service is approximately 1% to 1.2% of the purchase price, plus Value Added Tax.

Additional Costs

• Additional costs may arise for property appraisal, transfer of utility contracts, and potentially for financing.

Important Notes

• Regional Differences: Tax rates and fees may vary regionally. Please inquire about the specific conditions in Mallorca.
• Current Changes: Tax and fee regulations can change. It is advisable to stay informed about the current conditions before making a purchase.

Overall, property buyers in Mallorca should anticipate ancillary costs of approximately 10-14% of the purchase price. Careful planning and competent advice are essential to avoid surprises and ensure a smooth purchasing process.

Example Calculation for the Acquisition of an Existing Property in Mallorca Worth 1 Million Euros

1. Property Purchase Price: 1,000,000 EUR
2. Property Transfer Tax (ITP): For a property worth 1,000,000 EUR, the property transfer tax is 10%.
   • 1,000,000 EUR * 10% = 100,000 EUR
3. Notary and Land Registry Fees: These costs amount to approximately 1% of the purchase price.
   • 1,000,000 EUR * 1% = 10,000 EUR
4. Fees for Registration in the Land Registry: Estimated to be between 350 and 500 EUR. We assume an average of 425 EUR.
5. Legal Fees: Assuming these are 1% of the purchase price plus Value Added Tax.
   • 1,000,000 EUR * 1% = 10,000 EUR
   • Value Added Tax (assuming 21% on legal fees) = 10,000 EUR * 21% = 2,100 EUR
6. Other Costs: These can vary, but for the purposes of this example calculation, we will not consider them as they depend on individual circumstances (e.g., property appraisal, utility contract transfers).

Total Calculation:

• Purchase Price: 1,000,000 EUR
• Property Transfer Tax: 100,000 EUR
• Notary and Land Registry Fees: 10,000 EUR
• Fees for Registration in the Land Registry: 425 EUR
• Legal Fees (including Value Added Tax): 12,100 EUR
• Total Costs (excluding other costs): 1,122,525 EUR

This calculation provides an overview of the basic costs involved in purchasing an existing property in Mallorca worth 1 million euros. It’s important to note that these costs can vary, and there may be additional expenses not accounted for in this calculation.

Example Calculation for the Acquisition of a New-Build Property in Mallorca Worth 1 Million Euros

1. Property Purchase Price: 1,000,000 EUR
2. Value Added Tax (IVA): For new-build properties, the Value Added Tax is 10% of the purchase price.
   • 1,000,000 EUR * 10% = 100,000 EUR
3. Notary Tax (AJD): This tax is usually 1.5% of the purchase price.
   • 1,000,000 EUR * 1.5% = 15,000 EUR
4. Notary and Land Registry Fees: These costs are usually about 1% of the purchase price.
   • 1,000,000 EUR * 1% = 10,000 EUR
5. Fees for Registration in the Land Registry: Estimated to be between 350 and 500 EUR. We assume an average of 425 EUR.
6. Legal Fees: Assuming these are 1% of the purchase price plus Value Added Tax.
   • 1,000,000 EUR * 1% = 10,000 EUR
   • Value Added Tax (assuming 21% on legal fees) = 10,000 EUR * 21% = 2,100 EUR
7. Other Costs: These can vary, but for the purposes of this example calculation, we will not consider them as they depend on individual circumstances (e.g., property appraisal, utility contract transfers).

Total Calculation:

• Purchase Price: 1,000,000 EUR
• Value Added Tax: 100,000 EUR
• Notary Tax: 15,000 EUR
• Notary and Land Registry Fees: 10,000 EUR
• Fees for Registration in the Land Registry: 425 EUR
• Legal Fees (including Value Added Tax): 12,100 EUR
• Total Costs (excluding other costs): 1,137,525 EUR

This calculation provides an overview of the basic costs involved in purchasing a new-build property in Mallorca worth 1 million euros. It’s important to note that these costs can vary, and there may be additional expenses not accounted for in this calculation.

Example Calculation for the Acquisition of a Plot of Land in Mallorca Worth 1 Million Euros

1. Purchase Price of the Plot: 1,000,000 EUR
2. Value Added Tax (IVA): For plots of land, the Value Added Tax is usually 21% of the purchase price.
   • 1,000,000 EUR * 21% = 210,000 EUR
3. Notary Tax (AJD): This tax is usually 1.5% of the purchase price.
   • 1,000,000 EUR * 1.5% = 15,000 EUR
4. Notary and Land Registry Fees: These are usually about 1% of the purchase price.
   • 1,000,000 EUR * 1% = 10,000 EUR
5. Fees for Registration in the Land Registry: They can range between 350 and 500 EUR, so we assume an average of 425 EUR.
6. Legal Fees: Assuming these are 1% of the purchase price plus Value Added Tax.
   • 1,000,000 EUR * 1% = 10,000 EUR
   • Value Added Tax (assuming 21% on legal fees) = 10,000 EUR * 21% = 2,100 EUR
7. Other Costs: These can vary and depend on specific services and requirements.

Total Calculation:

• Purchase Price: 1,000,000 EUR
• Value Added Tax: 210,000 EUR
• Notary Tax: 15,000 EUR
• Notary and Land Registry Fees: 10,000 EUR
• Fees for Registration in the Land Registry: 425 EUR
• Legal Fees (including Value Added Tax): 12,100 EUR
• Total Costs (excluding other costs): 1,247,525 EUR

This example calculation provides you with an idea of the total costs that can be incurred when purchasing a plot of land in Mallorca worth 1 million euros. Please note that these costs can vary, and there may be additional expenses not accounted for in this calculation.

3. Ongoing Costs and Taxes After Purchasing Real Estate in Mallorca

When purchasing real estate in Mallorca, it is crucial to consider the ongoing costs and taxes. These costs are not only variable but also essential factors for long-term financial planning and budget management. Here is a detailed overview that helps buyers realistically estimate the expected expenses after the purchase:

Property Tax (IBI):

Calculated based on the cadastral value of the property. The rate varies between 0.4% and 1.1% depending on the municipality. For example, with a cadastral value of 500,000 EUR and a rate of 0.7%, the IBI would be 3,500 EUR annually.

Community Fees:

These depend on the size of the residential complex and the facilities offered. An average rate could range from 100 to 300 EUR per month.

Insurance:

The costs of building insurance vary depending on the size and value of the property. An average building insurance policy can cost between 200 and 600 EUR annually.

Garbage Collection and Municipal Services Charges:

These fees are usually included in the IBI but can vary depending on the service.

Wealth Tax (IP):

With the increased exemption threshold of 3 million EUR from 2024, many property owners will be exempt from this tax. Different tax rates apply if the value exceeds this threshold.

Utility Costs:

The costs for electricity, water, gas, telephone, and internet are consumption-dependent. For an average property, these costs can range from 150 to 300 EUR per month.

Income Tax for Non-Residents (IRNR):

When renting the property, there is a 19% tax on rental income. For personal use, a notional rental value is taxed, which is 1.1% of the cadastral value, with 19% of that value as the tax.

This list provides a framework for estimating the ongoing costs and taxes associated with owning real estate in Mallorca. It is important to individually verify the exact values and rates and consider them in financial planning.

4. Important Steps After Purchasing a Property

After purchasing a property in Mallorca, several essential steps are necessary to ensure the smooth operation and protection of your property:

Registration of Utility Services:

It is important to transfer electricity, water, and other services into your name as soon as possible after the purchase. This includes contacting local utility providers and potentially paying connection fees.

Property Security:

To protect yourself from illegal occupants, known as “okupas,” you should invest in security systems. This includes sturdy doors and locks, alarm systems, and surveillance cameras. Regular visits or hiring a trusted individual to oversee the property are also advisable. Building good relationships with neighbors can also help keep an eye on the property.

Maintenance and Repairs:

Regular maintenance is crucial to maintain the value and safety of your property. Plan for routine inspections of electrical systems, plumbing, the roof, and other critical elements of the property. Additionally, do not neglect the upkeep of outdoor areas such as gardens or pools.

5. Conclusion

These steps are essential to secure and maintain the long-term value and security of your property in Mallorca.
In this blog post, we have summarized important information about the incurred costs and necessary steps after purchasing a property in Mallorca. Our goal is to provide you, as a buyer, with better preparation and a deeper understanding of these processes. Our expertise as real estate agents in Mallorca can assist you in overcoming these challenges. You are welcome to browse our property listings on Luxury on Mallorca. If your desired property is not listed, feel free to contact us, and we will help you find your dream property.

Please note that despite careful research, we cannot assume liability for any errors or changes in costs and taxes. We recommend staying informed about the latest regulations.