In order to avoid your dream of owning a property in Spain turning into a nightmare, it is important to take advantage of professional advice.

We can help you with the following:

- Surveying the site (e.g. ensuring the provision of electricity, water and waste water disposal)

- Inspecting the quality of the construction of the property

- Preparing and checking complete sets of documents (e.g. land registry records)

- Preparing draft contracts (e.g. reservation contract, option contract and sales contract)

- Checking the legal status of the property

- Applying for a tax identification number (N.I.E.)

And with everything else you need to make your purchase proceed as smoothly as possible.

To this end, we have put together the following information for you:

Incidental one-off taxes levied on a property purchase:

On purchasing a property, either Value Added Tax or transfer tax is payable.

Value Added Tax (Impuesto sobre el Valor Añadido, IVA)

As a rule, Value Added Tax (VAT) is applicable if the seller is a VAT registered company, and the property is being sold for the very first time. In other words, on the sale of newly built properties as well as completed apartment blocks and freehold apartments. The rate of tax in Mallorca is 7% of the registered value (value specified in the deeds).

Other properties such as developed building plots (not plots in agricultural use), business premises and garages are taxed at a rate of 16%.

Stamp duty (Impuesto sobre Actos Jurídicos Documentados, AJD)

If the sale of a property is subject to VAT, then an additional stamp duty is also applicable. This tax rate varies from region to region, but in the Balearics it is as a rule 1% of the registered value.

Transfer tax (Impuesto sobre Transmisiones Patrimoniales, ITP):

Transfer tax is levied when the transfer of the property is not subject to VAT (Impuesto sobre el valor añadido, IVA). This is usually the case when a property sale is agreed between private individuals. The rate of tax levied is 7% of the value declared on the title deed. Whoever is paying the tax has 30 days after signing the title deed in which to pay the tax to the revenue authorities.

Increment value tax or plusvalía (Impuesto sobre el incremento de valor de los terrenos de naturaleza urbana)

Plusvalía is a municipal tax and is based on the increment in the value of the land purchased. The amount of tax depends on the land value, how long the property has been owned and the population of the municipality in which the property is situated. The taxable amount is based on its cadastral value (valor catastral). In the case of a transfer for consideration, the seller is liable to pay the tax, but it is often the case that the buyer pays the plusvalía.

Incidental one-off acquisition costs when purchasing a property:

Notarial fees, land registry fees and agency fees (Gestoria)

Normally, the acquisition costs amount to between 1.5% and 2% of the registered value.

Recurring annual taxes:

Property tax (Impuesto sobre bienes inmuebles, IBI)

Municipal property tax is payable annually to the local municipal administration (Ajuntamento). It is calculated on the cadastral value of the plot plus the buildings. The guideline tax rate for urban properties is 0.4% and for rural properties 0.3%, but these rates may differ from municipality to municipality.

Income tax on the sale of a property (Impuesto sobre la Renta de personafisicas, I.R.P.F.)

Spanish income tax differentiates between residents and non-residents and is paid annually. When a property is sold, the seller is liable for a one-off tax payment, which must be declared in an income tax return.

a) Income tax for residents

A resident is someone who spends more than 183 days a year in Spain, and is therefore liable to pay tax on his or her worldwide income.

Since 1st January 2007, where a profit has been made from the sale of a property, tax is liable on the capital gain at the rate of 18%.

b) Income tax for non-residents

Non-residents who own property in Spain are also obliged to complete an income tax return every year, and are liable to pay income tax on income arising in Spain.

In Spain, tax is liable even on owner-occupied properties that are not primary residences; simply the use of the property is regarded as income. The level of tax is calculated on the cadastral value of the property, and is 2% on values assessed prior to 1st January 1994, or 1.1% on values assessed after that date. Tax is payable at the rate of 24% on the calculated value.

In the case of non-resident sellers, 3% of the registered value is retained, and must be paid to the revenue authorities by the purchaser within 30 days.

Annual overheads:

Contributions to the owners' association (Gastos de comunidad)

If you buy a house on an estate or an apartment in an apartment block, you automatically become a member of the owners' association (Comunidad de propietarios) which takes care of the management and maintenance of the common facilities. Every year, a budget is drawn up to cover the costs of the management of the property. This is then shared out between the owners, and must be paid by them. These payments can vary considerably, depending on the estate or apartment building, and the level of maintenance required, for example, for the garden and pool facilities.

For this reason, we will always provide you with details of the relevant costs relating to any property you are interested in.

Household insurance (Seguro de Hogar)

Common facilities are normally insured through the owners' association, and the insurance covers the financial consequences of damage by fire, storms, hail, natural hazards and mains water. This means that you only have to insure your own property. As many international insurance companies are now well established in the Spanish market, you will find a wide choice of policies available. Insurance policies from Spanish insurance companies are very similar to those of British insurance providers. Some companies also provide policies in English.

If you have any questions regarding insurance, we shall be more than happy to help you.

Electricity bills (Consumo de energia)

Electricity consumption is in principal measured by an individual electricity meter, and billed on a two-monthly basis. The cost of connection, for which there is a minimum charge, is not included in the consumption charge. Electricity bills are normally paid by direct debit from the owner’s account with a Spanish bank.

Water bills (Consumo de agua)

In the case of apartments, water consumption was in the past often paid by the owners' association, but most apartment blocks now have individual meters. Water bills include the cost of waste water disposal.

Refuse collection costs (Tasa municipal de recogida de basura)

The municipal charges for refuse collection are set by the municipality for each property.

Telephone, fax and internet connections

The various communication links are now available throughout the Island without any difficulty. Rural areas are not connected to the Spanish land-line telephone network, but fully functioning satellite solutions are available from many telephone companies.

As the purchase of a property frequently throws up problems with which we are familiar, we are always happy to give you advice on any other queries you may have. We are always here for you.

Your Deluxe Properties team