3.2.1. Understanding Tax in Mallorca
When buying property in Spain it is a good idea to get an estimate of the amount you will need to pay on top in taxes. The total amount will usually oscillate around the 10% of the purchase price and will be slightly higher for buying new properties than re sales.
The percentage is calculated on the market value or declared value of the property which is usually slightly lower than the price you have agreed on. The tax authorities (Agencia Tributaria) can always reasses the value of your property for tax purposes and you can be taxed on the difference.
Most taxes will be paid by the buyer. Except for land tax (plus valia) and real estate agency fees. However if you do not draft it into the contract, you can end up paying all costs.
The Spanish Tax year
The Spanish tax year runs from January 1st to December 31st. If you spend more than 183 days a year in Mallorca (not necessarily consecutively), you are considered a resident for Spanish tax purposes and will have to submit a tax return before the end of June each year.
It is worth noting that taxes in the Balearics vary slightly from the Spanish mainland, so if you are familiar with the Spanish taxation system you may still need to double check that the same taxes and fees apply in Mallorca.
You are advised to seek the help of a professional financial adviser. As well as income, wealth and possible other national taxes (depending on circumstances), there are municipal taxes, otherwise known as IBI, and rubbish tax (basura).
3 Tiers of Government.
Mallorca is the largest island and regional capital of the Balearics, an autonomous community in Spain. As such, when you purchase real estate in Mallorca you will be dealing with 3 separate governmental offices:
-The Municipality, i.e.: the town, in which the property is located
-The Regional government: The Balearic Islands
-The National government: Spain
It is essential that you determine your residency status in Spain. Fiscal residents in Spain pay taxes on their income worldwide, but non-residents are taxed only on their income within Spain.