How to buy a property in Mallorca when you are a foreigner, being a EU resident or a non-EU resident ?
Mallorca, this stunning island located in the Mediterranean Sea, has become an increasingly desirable destination for foreigners seeking to purchase a home.
With its breathtaking natural beauty, vibrant culture, and Mediterranean lifestyle, Mallorca offers an enchanting blend of picturesque landscapes, pristine beaches, and a rich historical heritage, the island attracts individuals from around the world who aspire to buy a property in Mallorca.
While the process of buying a house in Mallorca as a foreigner may involve certain complexities, the rewards are plentiful. From a robust tourism industry that provides excellent home rental opportunities to a stable real estate market that has shown resilience over the years, investing in a property on the island can offer both an idyllic retreat and a promising investment opportunity.
In this guide, we will delve into the essential aspects that foreigners should consider when buying a house in Mallorca.
Which Documents do you need to buy a house in Mallorca ?
As a foreigner interested in buying a property in Mallorca, you will need to fulfill certain requirements and provide specific documentation. While the general process may vary depending on your specific circumstances and any changes in regulations, here is a list of common documents typically required:
Basic required documents to buy a property in Mallorca.
The 3 necessary documents to start the procedure of buying your dream home in Mallorca:
- A valid passport:
You will need a valid passport as proof of your identity. - A Foreigner Identification Number (NIE):
Obtaining a NIE is essential for any real estate transaction in Spain. It is a unique identification number for foreigners. You can obtain it from the Spanish Consulate or through the immigration office of local police station in Palma de Mallorca.
The type of NIE to apply for depends on the country of origin of the foreigner who is going to buy a house in Mallorca and the time he plans to spend on the island per year.
What is the NIE?
The NIE is the identification number for foreigners, a personal, unique and exclusive number whose function is to identify foreigners who for some reason are related to Spain. It will be used in all documents issued or processed by the State.
At le Reve Mallorca Property, we can help you with this step. Our collaborating legal team is not only specialized in real estate transactions but also in immigration and fiscal matters.
- A Spanish bank account proof :
You will need to open a bank account in Spain to facilitate financial transactions related to the property purchase.
Additional formalities – the 6 steps to buy a property in Mallorca
Once these two formalities are done, we can start with your buying procedure in Mallorca
- Legal representation
At Le Rêve Mallorca Property, we highly recommend you to get a legal representation and to engage a local lawyer or legal representative who specializes in real estate transactions.
Our collaborating team will guide you through the process, review contracts, and ensure compliance with all legal requirements.
They have decades of experience handling international proceedings and transactions.
If you cannot be present in person for the entire process, you may consider granting power of attorney to a trusted representative, enabling them to act on your behalf during the purchase process.
- Proof of funds
You will likely be required a proof of funds and provide evidence of sufficient funds to buy your house in Malllorca. This may include bank statements or other financial documentation demonstrating your ability to cover the purchase price and associated expenses.
Our certified mortgage adviser will help you to find the best financing if necessary.
With a Spanish NIE can obtain a mortgage loan up to 80% of the purchase price for a first home. In the case of second homes, it would be up to 60%-70% of the purchase price.
- Property Registry Extract:
We will request a ¨nota simple¨ or property registry extract from the Land Registry (Registro de la Propiedad) to verify the property’s legal status, ownership, and any existing encumbrances or mortgages.
- Purchase Offer – Letter of intent:
We will prepare a purchase offer or agreement, including the terms and conditions of the purchase, price, and any additional clauses or contingencies.
- Down payment
Once the owner accepts the offer, we will prepare the called ¨contrato de Arras¨, a private agreement where the parties agree to carry out the future sale and purchase of a property. You will, as the buyer, deliver an amount of money on account of the total. The amount of the deposit depends on the purchase price of the property (usually 10% of the price, but can be less).
- Public deed before notary:
A sale is finalized with the “Escritura” before a notary. This is a public document that provides legal certainty to the buyer and seller when transferring a property and registering it in the Land Registry.
Both the buyer and seller must be present (or represented) as well as any banks that may be involved. The buyer makes the final payment and the property passes to him.
You will be given an authorized copy of the deed on official paper with all the supporting documents and invoices
Our collaborating lawyer works with a notary in the centre of Palma, which will make this specific process easier and smoother for you.
When you buy a property in Mallorca, it entails the payment of several taxes
Once the deed of sale has been signed and registered, you will be obliged to pay taxes on the purchase and taxes for owning a property in Mallorca.
Taxes on the purchase of a Property:
Depending on the conditions of purchase: new or second hand house, the purchase will be subject to one of the following taxes:
- The Value Added Tax (VAT) on a new property
In the case of buying a new property, you will be obliged to pay VAT, at a reduced rate of 10% on the price of the property.
In addition to VAT, the buyer will have to pay stamp duty, which will vary between 0.4% and 1.5% of the property price, depending on the property location.Or, the transfer Tax (ITP) on a second hand property
If you buy a second hand property, you will have to pay the transfer tax. The percentage is fixed by the Autonomous Community in which the property is located. In Balears the land transfer tax is staggered. On the first 400.000 euros, the purchase price is taxed at 8%. From 400.00 euros the rate increases, up to 13%, depending on the purchase price.
Taxes on Real Estate owning :
- The property tax (IBI):
This is a local tax levied by the townhall. It depends on the location of the property. The amount is usually around 0.85% of the cadastral value.
- The income tax:
If the property acquired is your second or vacation home, and is not used as rental property in Mallorca, you will be required to declare annually as real estate income between 1.1% and 2% of the cadastral value of the property. This amount will be taxed at 19% if the owner is an EU citizen or at 24% for all other taxpayers.
(Example: as a US citizen, if the cadastral value of your second home is 100.000 euros, your income tax to be paid is 264 euros.)
- Capital gains tax – wealth tax:
The Spanish Wealth Tax is an annual tax payable by residents and non-residents. It applies on your assets’ net value as of 31 December. It does come with allowances and there are exceptions depending on whether or not you are a resident of Spain and which region you are in.
For example, for a second home the amount of 700.000 euros per person is exempt from tax.
Our collaborating fiscal advisers can provide you with all the information depending on your specific case.
For foreigners contemplating to buy a house in Mallorca, embarking on this exciting journey requires navigating through a unique set of considerations and requirements. Understanding the local regulations, legal procedures, and cultural nuances is crucial to ensuring a smooth and successful property acquisition process.
Whether you are seeking a permanent residence, a vacation home, or a property for investment purposes, this guide aims to provide you with the knowledge and insights to make informed decisions and turn your Mallorcan property dreams into a reality.
In any case, at le Rêve Mallorca Property we make sure to collaborate with wide array expertise teams. Your legal, fiscal, financing and immigration concerns will be assessed all along the process.
So, let us embark on this journey together and uncover the possibilities that await you in the captivating realm of Mallorca…
