Tax on the purchase of a luxury property in Mallorca in 2023

If you want to buy a luxury property in Mallorca, it is important that you know the taxes and costs associated with this transaction. In this article we will go over the taxes and additional costs that you should be aware of when buying a luxury property in Mallorca.

What taxes do I have to pay when buying a luxury property in Mallorca?

Depending on the type of transaction, you may be subject to Value Added Tax (VAT) or Real Estate Transfer Tax (ITP).

Newly built real estate is subject to the reduced VAT rate of 10 %, while other transactions, such as the purchase of land or buildings, are subject to the full VAT rate of 21 %.

As for the ITP, this tax varies depending on the purchase price. In the Balearic Islands, the tax rates are as follows:

Up to €400,000: 8%.

400.000,01 € – 600.000 €: 9%

600.000,01 € – 1.000.000 €: 10%

1.000.000,01 € – 2.000.000 €: 12%

2.000.000,01 € and more: 13%.

Other costs associated with the purchase of a luxury property in Mallorca

In addition to taxes, there are other costs associated with buying a property in the Balearic Islands. These include:

• Stamp Tax (Impuesto sobre Actos Jurídicos Documentados por contrato de compraventa notarial): 2 % of the purchase price.
• Legal fees: 0.5 % - 1 % of the purchase price plus VAT.
• Notary fees: approx. 0,3% of the purchase price.
• Land Registry: about 0.25 % of the purchase price.
• Gestoría: between 200 € and 1,000 €.

Annual taxes to be observed

On the other hand, there are annual taxes that you have to pay as the owner of a property in the Balearic Islands. These are:

Property tax (IBI): levied by the municipality on the cadastral value of the property and is usually between 0.3 % and 0.4 % of the cadastral value.

Income tax: If it is a resident owner, 50 % of the rental income is taxed. For non-resident owners, the tax rate is a flat 24.75 %. In both cases, the expenses are deductible. In addition, if the owner does not use the property as his main residence, a notional annual rent of 1.1 % of the cadastral value is attributed to him.

Conclusion

When buying a luxury property in Mallorca, it is important to consider the additional taxes and expenses associated with the transaction. In addition to taxes, the cost of purchasing and maintaining the property must also be taken into account. We hope you found this information useful. If you want to learn more about the taxes involved in buying a luxury property in Mallorca, you can download our free guide.