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Money Saving Tips :: Majorca Property
Majorca Property: Taxes on Vacation Property in Majorca
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Majorca is the largest Spanish island on the Mediterranean Sea and Majorca property is a hot ticket item for Europeans and travel-savvy North Americans looking for a great vacation getaway. The island has been a popular tourists' destination since the 1960s and continues today to be a hotbed of resorts, restaurants and vacation living.
If you're considering purchasing Majorca property for a vacation home, keep reading for answers to frequently asked questions covering topics like taxes and Spanish property law.
What kinds of taxes will I need to pay when purchasing a vacation home on Majorca?
There are five possible taxes that you'll need to pay when buying or selling a property in Spain. The first is called TIP – a transfer tax that is payable whenever you purchase property from a private owner. On Majorca, the TIP translates to about 7 percent of the purchase price.
The second tax is IVA, which is like a sales tax and so only payable when you purchase a property directly from a developer. Like TIP, it's charged at a rate of 7 percent. The third tax is a stamp duty, which is essentially a document or deed transfer tax that equates to 1 percent of the purchase price.
The fourth tax is called Pusvalia, but is often negotiable whether the buyer or the seller pays. Traditionally, on Majorca, the buyer pays. Finally, the fifth tax is a Capital Gains Tax, which is an 18 percent tax that's payable when you sell the property for a profit.
It's important to note that if you're purchasing a Majorca property from a non-Spanish resident, you will need to withhold 3 percent of the purchase price and give it directly to the Spanish government as a down payment on the seller's Capital Gains Tax.
What are the property taxes like on Majorca?
The primary local property tax is called the IBI and is calculated based on the property's official value. Depending on the area and specific township where your Majorca property is located, your tax rate will vary. If your home is in a rural area, you will have to pay a “Contribucion Territorial Rustica,” which is a property tax equivalent for rural residents.
Finally, there is often a “Tasas y Cargas,” which is a small tax or fee charged by your local municipality to cover services like waste disposal, parks, beach cleaning and so on.
Do I need to be a Spanish resident to own property?
No, non-Spanish residents or citizens can obtain what's called a NIE (Numero de Identificacion de Extranjeros). This is an identification number that can be used by all non-nationals and non-residents to own Majorca property and pay the related taxes.
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HomePropertyTips.com :: Majorca Property