Taxes on Purchase

Are you a buyer?

Whether you are a resident in Spain or not, for the purchase of a property located in the Balearic Islands you must settle indirect taxes. Which ones?

If it is a home, the tax will depend on whether it is a new construction (first delivery) or a "second or subsequent delivery" home:

1. NEW HOME: 10% VAT plus AJD
   1. Generally 1.5%, except:
      1. 1.2% on the first copies of deeds and notarial records, when their purpose is the onerous transfer or constitution of property rights over real estate that will constitute the buyer's first home, as a primary residence, when the real or declared value (whichever is higher) of the property is equal to or less than €270,151.20.
      2. 2% for the onerous transfer or constitution of property rights over real estate when the real or declared value (whichever is higher) of the property is equal to or greater than €1,000,000.
2. USED HOME (second transfer): TPO (progressive rate of the Tax on Patrimonial Transfers).

Progressive TPO Rate Balearic Islands, General Rule

For the case of parking spaces (with the exception of garages attached to homes up to a maximum of two (in which case the general rule described in the previous table applies), the table to consider is the following:

Progressive TPO Rate Balearic Islands parking spaces

(TPO) approved by the Balearic Community QFL 2012/281277 Balearic Law 15/2012 of December 27, 2012.

If it is a plot/land to build a home, the taxation will depend on whether the transferor, current owner, is a company or an individual.

1. SELLER, COMPANY/PROFESSIONAL: 21% VAT
2. SELLER, INDIVIDUAL: TPO (See previous table)

Other aspects for the buyer to consider

In the case where the seller is a "non-resident", Spanish regulations oblige the buyer (with certain exceptions) to withhold a % (currently 3%) of the total agreed price, with the duty to deposit it on their behalf with the corresponding Administration, as Non-Resident Income Tax.

On the other hand, it should also be noted that once the investment is made, in the case of an individual, there are other tax obligations.

Annual taxes to consider:

I) the Real Estate Tax, IBI is a tax that local authorities levy on the value of the property. It is calculated using the cadastral value (valor catastral), which is the taxable value of the property. IBI is paid annually. IBI varies from region to region. In general, the minimum legal rates and applicable surcharges fluctuate between 0.4% and 1.1% of the cadastral value.

II) Waste collection: annual fee for garbage collection

III) Wealth Tax, recently reinstated by the Government, temporarily for the 2011, 2012 and 2013 tax years. The autonomous communities also have jurisdiction over this tax and some of them establish bonuses regarding it.

This tax rate ranges from 0.2% to 2.5% of the state scale, and from 0.28% to 3.45% of the Balearic Islands regional scale. There is a tax-free allowance in both cases of €3,000,000.

IV) Income Tax, it will depend on whether you are a Resident in Spain or not, and for this purpose it will be determined if you live more than half the year in Spain and establish it as your permanent residence.

IV. 1 Residents in Spain, will pay on their income according to the brackets established by the Spanish Treasury.

Progressive Income Tax rates:

IV. 2. Non-Residents - NRIT (IRNR)

a) Imputed income from urban properties for personal use. Non-residents who do not rent their property in Spain must pay Non-Resident Income Tax (NRIT) on the declared value of the property's use. This tax is calculated as follows:

The taxable base is 2% of the cadastral value (or 1.1% if the cadastral value has been revised).

The tax rate is then 19% of this amount for residents in the EU or EEA, or 24% for residents elsewhere.

For properties that do not have a cadastral value, or if the taxpayer has not been notified of such value before the tax due date, a tax base of 1.1% of 50% of the purchase price is applied.

b) Income from rented properties.

If the non-resident taxpayer rents the property, the income to be declared is the total amount received from that property. Expenses, as provided by law, can be deducted from this amount for residents of the EU and EEA.

A tax rate of 19% applies for residents of the EU and EEA, and 24% for all other residents.

V) Finally, it should be noted that in Spain there is an Inheritance and Gift Tax. Thus, in the case of properties located in Spanish territory, the acquirer (heir or donee) must settle the tax, which is progressive.

For resident parties, both in the case of the donor/decedent and the donee/successor, Balearic regulations could apply. These provide for bonuses that make the tax due practically zero in most cases.

However, if any of the parties is non-resident at the time of transfer, especially in the case of a non-resident successor, the applicable regulations should be analyzed, as having a "non-resident" variable in the formula, it will most likely be the state regulations, so, with few exceptions, no reductions or bonuses will apply and taxation will follow the rates and rules established by state regulations.