Luxury Property Buying Guide in Mallorca - One Mallorca Smart Real Estate

Dancers in the Real Estate Market

ALL YOU NEED TO KNOW ABOUT BUYING A PROPERTY IN MALLORCA

WELCOME MESSAGE

by May Pérez

BUYING PROCESS: 6 STEPS TO KNOW

Step 1. Finding the perfect home Step 2. The financing process Step 3. Making an offer Step 4. Signing a contract Step 5. Examination of the legal state of the property Step 6. Public deed of sale

TAX IMPLICATIONS AND FEES

ITP - Property transfer tax (regional tax)

VAT - Value added tax (national tax)

IAJD - Certified legal documents tax

Withholding tax - 3% capital gains retention

Notary and property registry fees

Wealth tax

IBI - Local property tax

Other annual taxes

FREQUENTLY ASKED QUESTIONS

What is the NIE number and how do I obtain it?

Should I finance a purchase of a property in Mallorca?

What should I do before the completion date?

What are the broker’s fees?

Do I need a local lawyer and how much do they charge?

What is the Spanish Golden Visa program and who can make use of it?

May Pérez Managing Director one-mallorca.es

Welcome to Dancers in the Real Estate Market

A STEP-BY-STEP GUIDE TO THE WHOLE PROCESS OF BUYING A PROPERTY IN MALLORCA

According to May Pérez, founder of the luxury real estate company One Mallorca Smart Real Estate, “Buying and selling a property can be compared to a choreographed dance. The coordination of all the steps in the sales process as if it were a dance.

Our experienced multilingual team is here to provide professional advice and guide you through all the steps of buying a property in Mallorca. Our aim is to make sure the buying process goes smoothly from the very first moment right through to completion. From carefully selecting properties to closing the purchase, we take care of all aspects of the deal.”

Welcome to the exclusive real estate world of One Mallorca.

Let’s dance!

one-mallorca.es

Property Buying Process In Mallorca: 6 Steps To Know 1.

FINDING THE PERFECT HOME

Owning property in Mallorca is a great opportunity to live in a secure environment and enjoy an exceptional lifestyle.

While many buyers today are looking for opportunities with outdoor living spaces and sunnier climates, Mallorca has become one of the most popular choices as it offers a perfect year-round climate, a diverse cultural lifestyle and an ever-growing property market with an attractive return on investment.

The agent advising you on your property purchase will need to fully understand your needs so that they can offer a tailor-made service and find the property you want. Like a director of the orchestra, your agent will be qualified to represent, coordinate and support you throughout the entire buying process, starting at the very beginning - the search.

Thanks to our collaboration and synergies at different business levels in Mallorca, our portfolio offers a careful selection of the best properties available on the market. When it comes to finding the ideal location, the perfect home and the desired environment, we act as a filter to save you time and travel, providing you with only those properties that perfectly match your search criteria and budget requirements.

Our aim is to make the property search process enjoyable and exciting by coordinating viewings, arranging meetings with architects, tax advisors, solicitors and making sure you understand all aspects of buying a property.

Juanita Casanas

President at Lionsgate Capital – The Leading Mortgage Brokers in Mallorca lionsgatecapital.com

THE FINANCING PROCESS

Financing a property with a mortgage remains one of the most attractive options for buying a property in Mallorca as buyers can minimise the wealth tax, maintain liquidity and make the most of the low interest rates available today.

It is important each buyer understands the advantages and the different mortgage options offered by international and Spanish banks. In most cases, Spanish mortgages have no restrictions on the purchase price or the nationality of the buyer, the biggest difference in the maximum loan-to-value (LTV) that banks permit for resident and non-resident loans. Residents can generally borrow up to 80% of the property’s appraisal value. Non-residents are limited to 60–70% LTV, depending on the mortgage type and appraisal of the property.

The bank or the mortgage broker will arrange an appraisal for the mortgage application. The cost of a property appraisal varies according to the purchase price. Once the mortgage has been approved, the remaining funds will be needed to cover the remaining amount and purchase costs.

The maximum loan-to-value percentage and repayment terms vary depending on the bank, and a good mortgage broker can negotiate better terms and conditions for each client, as long as the applicant’s profile and solvency are appropriate. We can introduce you to the leading mortgage brokers in the Balearic Islands. They are one contact for all the banks and request preferential conditions and exclusive mortgage terms for all our clients.

THE LOAN TO VALUE RATIO FOR HOUSING IN SPAIN

Up to 80% of the property value for resident mortgages

60-70% of the property value for non-resident mortgages

STEP 1

MORTGAGE APPLICATION

When you contact the mortgage broker, they will arrange a meeting, study your information and will ask you to provide a series of documents for the application. They will prepare a report and submit it to the best banks for each client, based on their priorities.

STEP 2

MORTGAGE APPROVAL

Once your application is approved, a property appraisal will be arranged, which takes 5-7 days. The property value will be checked and the mortgage amount confirmed. The formal offer will then be issued and once signed, will be sent to the Notary in preparation for completion.

If you finally decided to finance the purchase of your home and wish to obtain the most attractive mortgage terms, it is important to take into account the following steps.

STEP 3

MORTGAGE TRANSACTION

Once the notary receives the documents, by law these must remain in the notary 10 days before the transaction can be completed. The client must visit the notary prior to completion to confirm they understand the terms and conditions of the mortgage.

STEP 4

SIGNING THE DEED

On the day of completion both the mortgage and the public deed of sale are signed directly in front of the Notary. Once everything has been signed and paid, the clients will receive the keys to their property to start enjoying their new home.

MAKING AN OFFER 3.

From furnishings, the potential cost of repairs, deadlines for property reservation, deadlines for signing at the notary, to the methods of payment and handing over of the keys, there are many factors that affect the price to offer on a property.

We know how many aspects should be taken into account when closing a purchase deal. We therefore offer trustworthy advice, represent your interests and mediate in the negotiation process to obtain the most favourable terms and get the best out of the deal for all our clients.

SIGNING A CONTRACT

When the property purchase price and payment terms have been agreed and the administrative paperwork has been checked, the seller and buyer can proceed with signing a private purchase contract and paying the reservation deposit.

The first contract is not the transfer of the ownership. It protects the right to buy after having paid for the option and means there is an obligation to sell within a predetermined period of time.

Usually 10% of the purchase price is paid as a deposit to reserve the right to purchase the property. This amount can be paid directly to the seller or deposited in an escrow account of a third party, normally the fiduciary account of the Notary.

Carlos Pérez Marsa Lawyer specialising in real estate law pemaga.com

Types Of Contracts

There are two types of a private purchase contract, an option contract and an “Arras” contract. The most important differences are explained in the following overview.

OPTION CONTRACT

“ARRAS” CONTRACT

RIGHT OF PURCHASE BY A THIRD PARTY

Option contract grants a right to the optionee (buyer) to purchase the property for an agreed amount within a fixed time, and transfer this right to a third party.

RIGHT OF PURCHASE BY A THIRD PARTY

“Arras“ contract does not allow the buyer to transfer the right to purchase to a third party.

FULFILMENT OF CONTRACT

Once the contract is signed, the seller is obliged to sell and not allowed to terminate the contract since the buyer can exercise his right to buy. For greater assurance, the buyer could register the option contract in the Land Registry.

TAXATION

For the buyer, the option contract is subject to the same tax as the subsequent purchase (ITP or VAT). It is important to remember that the tax must be paid in addition to the tax payable on the sale.

FULFILMENT OF CONTRACT

An “arras” contract can be terminated by both parties. If the buyer terminates it, he / she will lose the amount of down payment, while if the seller terminates it, he / she must return twice the amount of the down payment to the buyer.

TAXATION

An “arras” contract is not subject to taxation prior to signing the public deed of sale. If the sale does not take place, the deposit will have to be declared as capital gains or losses by the parties.

The Bespoke Oasis

WE DESIGN UNIQUE AND SUSTAINABLE GARDENS!

At Cocos Garden, we offer our clients dream gardens that blend excellence and longevity.

A careful selection of Mallorcan plants is the basis for the creation of our gardens that coexist in perfect balance with the surrounding environment. Combining functionality and elegance, our gardens are integrated into the landscape to meet the needs of our clients.

We invite you to visit the COCOS centre in Andratx, a space that introduces gardening, ecological products, decoration, and an exquisite selection of unique pieces designed by local artists. cocosgarden.net

EXAMINATION OF THE LEGAL STATE OF THE PROPERTY

To ensure that the property you are buying is fully legal, a lawyer and architect should carry out the due diligence and check all the legalities of the property with the local authorities.

This includes looking into the property registry, making enquiries at the town hall, reviewing the information at the cadastral office, and verifying its correct registration, as well as confirming its urban planning legalities, alterations and renovations, and if its conditions are a true reflection of the property state.

The lawyer also checks whether the property is free of any pending charges, liens, or encumbrances that burden the property.

This due diligence usually takes a few weeks, so there is always a risk that purchase will not be advisable if there are legal irregularities with the property. For this reason, we recommend signing a private purchase contract with the corresponding dissolution or resolution clauses that allow the buyer to walk away from the agreement without any repercussions and, in the case of an option contract, can obtain the return of the deposit.

PUBLIC DEED OF SALE

The final step is to sign a public purchase deed. All parties involved, the seller and the buyer with their legal representatives, as well as the real estate advisors make an appointment with a designated notary, chosen by the buyer.

Before signing the purchase deed, your lawyer will provide you with a draft of the deed. You can request this a few days before signing so that you can check everything and make any necessary modifications. At this stage you will also receive a settlement of expenses from your lawyer. During this final stage, the payments to the intermediaries, taxes and other associated expenses are settled.

Granting the public deed of sale/purchase is essential for the registration of the acquired property under the name of a buyer in the Land Registry. The public deed is signed in front of a Notary and the seller is required to hand over all the documents of the property.

The buyer must bring his original documents and the NIE document or its application (In FAQ we explain why NIE is important and how to apply for it). At the notary, the buyer will sign the purchase deed, provide the remaining payment and receive the keys to move in.

Alejandro Palomino Architect “19 years designing dreams” apalomino.com

Mediterranean Flavour

WITH SOPHISTICATED TOUCHES OF AVANT-GARDE AND DESIGN

At One Mallorca we would like to bring the kitchens of Espacio Home Design to our clients.

Over the years, the kitchen has gone from being an unnoticed room to become the star of the house par excellence. A space designed for sharing and enjoyment. From the first coffee in the morning to the last glass of wine. Nowadays, the kitchen has taken up its relationship with all the inhabitants of the home and is the centre where various moments of the day come together.

Kitchens are their speciality and passion and they have been demonstrating this since 1945. They have not only the most prestigious international brands in the sector but also their own brand, Cocinart. At Espacio Home Design they design, manufacture and assemble kitchens of the highest quality with certified materials that guarantee the best standards of quality and durability of all their furniture.

Come and meet them.

Photographer: Piet - Albert Goethals Project and Design by Durietz Design & Development

Joan Cerdá Riutort Founder / Specialists in national and international taxation joancerda.com

Tax Implications and Fees

1.

PURCHASE ASSOCIATED TAXES

ITP - PROPERTY TRANSFER TAX (REGIONAL TAX)

If you buy a pre-owned property the purchase is subject to the ITP (Property Transfer Tax). In this case, the tax rate varies depending on the purchase price appearing in the deed.

Currently, in the Balearic Islands, ITP is paid based on the property acquisition price and below scale:

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%

From 2.000.000,01 €: 13%

Deadline: The buyer should pay ITP within one month after the date of granting the public deed of sale.

VAT - VALUE ADDED TAX (NATIONAL TAX)

If you purchase a new property it is subject to VAT, known as IVA in Spain. VAT is the national tax and it is the same wherever the property is located.

Currently, VAT is 10% of the purchase price of newly built residential properties and 21% for commercial properties, plots for development, warehouses, and garages.

Deadline: The buyer must pay VAT to the seller at the time of the transfer of the property.

IAJD (CERTIFIED LEGAL DOCUMENTS TAX OR STAMP DUTY TAX)

As VAT is a national tax, you also have to pay a regional tax to the Balearic government called IAJD .

As from 1 January 2023, the stamp duty is 2% for the first copies of deeds and notarial certificates for the transfer for valuable consideration or the constitution of rights in rem over real estate when the real or declared value (provided that the latter is higher than the actual value) of the real estate is equal to or higher than 1,000,000 euros.

Deadline: IAJD must be paid within one month after the date of granting the public deed.

A Look into the Future

PERFECT BALANCE BETWEEN SUSTAINABILITY AND ELEGANCE

Together with Porsche Baleares, we bring electric mobility to our customers and to all our properties. A look into the future that allows us to participate in the conservation of Mallorca’s natural resources.

The passion for sports cars with Porsche E-Performance, combined with an emotional concept of electric mobility, is another step towards the mobility of the future.

If you want to have a well-designed charging infrastructure at home, Porsche Baleares offers you a successful balance between sustainability and elegance. porsche-baleares.com

WITHHOLDING TAX - 3% CAPITAL GAINS RETENTION

This withholding tax arises from the obligation for non-residents to pay the non-resident Income Tax (IRNRL). Due to the circumstances that foreigners change their address after the sale and may ignore their tax obligations in Spain, it is the responsibility of the buyer, whether a resident or not, to withhold 3% on the purchase price of the property, as a prepayment on account of taxes on potential gains from the transaction.

This retention must be presented by the buyer to the Tax Office through Form 211, and a copy must be provided to the seller to justify the deposit of the retention has been paid. Your lawyer can handle the payment and the rest of the tax obligations on your behalf.

Deadline: 3% withholding tax should be paid within one month from the date of sale.

NOTARY AND PROPERTY REGISTRY FEES

Once the public deed is granted, a few other fees and rates should be paid. Before providing an original deed to the Land Registry, the buyer must pay the Notary and the Property Registry fees, as well as the Property Transfer Tax or VAT.

Property Registry fees vary according to the type, the value of the property, and the area, and normally is less than 0.5% of the purchase price.

The notary charges both a fixed and a variable fee, based on the property’s valuation. The amount of fixed fees depends on the extent of the legal provisions. Normally these add up to around 0.5%-1% of the purchase price.

Notary variable expenses vary based on the purchase price, the number of notary pages, and the documents. Your lawyer will be requesting the budget from the Notary before the completion date.

Deadline: Notary and property registry fees are paid when signing the public deed of sale/purchase.

The Art of Living

A LIFE FULL OF ART

Gallery RED offers clients an amazing selection of exclusive artwork.

The gallery showcases a combination of the most sought-after contemporary and emerging artists throughout the world. Some of these renowned artists include Andy Warhol, Basquiat, Gerhard Richter and Damien Hirst, among many others.

From One Mallorca we pay tribute to art, design and exclusivity with Gallery Red. galleryred.com

ANNUAL TAXES

WEALTH TAX

The wealth tax in Spain, also known as “Impuesto de Patrimonio”, is a tax that both residents and non-residents must pay on their assets. It is a tax that must be paid yearly on top of other taxes like VAT or withholding tax. So this is always something important to consider when buying a property in Spain, particularly high-end properties.

Currently, the Balearic Islands have specific wealth tax rates, varying between 0.28-3.45% based on the highest value between purchase price, cadastral value or value fixed by tax authorities. The tax is regulated and there is a minimum exception per person set at €800,000 for residents and €700,000 for non-residents. When a mortgage is in place at the time of completion, it is deductible for wealth tax purposes and is therefore beneficial, especially in the high-end properties.

Deadline: Wealth tax returns are due on June 30th for assets held in the previous financial year.

IBI - LOCAL PROPERTY TAX

Every property owner in Spain, whether or not they are resident, must pay Local Property Tax (IBI). This property tax is a municipal tax, with a specific amount calculated by the local Town Hall of the municipality of your property.

This property tax varies from 0.4% to 1.1% depending on the area and based on the cadastral value of the property, determined by the municipal government, which is usually much lower than the market value of the property. The cadastral value appears on receipts of your IBI tax payments.

Deadline: Payment of IBI depends on the municipality, although it’s normally paid in OctoberNovember.

TAX ON WASTE DISPOSAL

This local tax is applied for garbage, solid waste, and sewage municipal services and is paid annually. Every location has its specific rates and the deadline for payment also varies according to each area.

Both, local Property Tax and Tax on Waste Disposal should be paid through recurring bank debit payment so that the Town Hall charges them automatically without prior notice of payment to the owner.

Deadline: The payment deadline varies according to the municipality.

IRNR - STATE INCOME TAX ASSOCIATED WITH TENANCY OF THE PROPERTY

If you are considering letting your home, you will be liable to pay IRNR (Impuesto sobre la Renta de No Residentes). It is a national tax on the income you receive from letting a property. As a result, you should declare your income and submit the tax return annually. IRNR is applicable for both residents and non-residents.

If you own a property for personal use and do not let it, you must submit the return. If the property is rented for income, you must submit an income tax return. Currently, the tax is calculated at 2% of the cadastral value or 1.1 % (for properties with a cadastral value revised after January, 1st 1994) and then 19% of this number (24% if you are not an EEA citizen).

Expenses that you may deduct from your rental income include mortgage interest, costs associated with the purchase of the property, e.g. transfer tax and legal fees, non-national taxes, property maintenance and repair costs, community fees, property insurance fees, utility costs, and marketing expenses to promote your property.

Deadline: An annual tax declaration has to be presented by December 31st of the relevant tax year.

African Design with Mallorcan Soul

EVERYTHING YOU WISH FOR

Lindner Golf Resort **** hotel offers a cocktail of unique experiences. The benchmark hotel for golf lovers that also offers outstanding relaxing wellness facilities.

This exclusive resort brings the Lindner experience closer to the clients of One Mallorca Smart Real Estate for whom it has kindly prepared a special offer.

All clients of One Mallorca Smart Real Estate can enjoy 10% discount on Flexible accommodation rates.

The entire team of Lindner Golf Resort is at your disposal and looks forward to welcoming you in Mallorca.

Frequently Asked Questions

1. WHAT IS THE NIE NUMBER AND HOW DO I OBTAIN IT?

In order to buy a property or any other asset in Spain, you need an NIE (Número Identificación Extranjeros). It is an identification number for foreigners necessary to carry out economic activity and fiscal operations in Spain.

Once you have an NIE number you will be able to open a bank account, sign the purchase letter at the Notary and make any tax payment. Without an NIE number, the Spanish tax authorities are unable to process annual tax payments such as income tax (IRPF), and wealth tax (“Impuesto de Patrimonio”), both of which must be declared by resident and non-resident owners.

The lawyer representing you will take care of all the legal procedures during the application process, including obtaining an NIE number, so that you don’t have to worry about anything.

2.

SHOULD I FINANCE A PURCHASE OF A PROPERTY IN MALLORCA?

Financing your property purchase provides a series of tax advantages depending on the purchase price.

We always recommend you look into the local mortgage options, as it is often the easiest way to obtain an attractive mortgage proposal to finance your property. Then you are ready to move quickly to sign the deal for the purchase of your dream home.

We suggest you contact us to recommend the leading mortgage advisors in the Balearic Islands, who are one contact for all banks. Our partners will help you obtain the best mortgage with the most competitive rates and conditions whilst making the whole process easier and quicker.

3. WHAT SHOULD I DO BEFORE THE COMPLETION DATE?

Usually, the day before the deed-signing date, the seller and the buyer arrange an inspection visit to ensure that the property is left as previously agreed and the buyer is satisfied with the property after visiting.

Your agent will check that everything remains in order, taking the accurate water and electricity meter readings, and reviewing the inventory if the property is sold with furniture, art objects, or valuable decor.

4. WHAT ARE THE BROKER’S FEES?

Brokerage fees are normally paid by the seller unless the buyer has expressly agreed to pay the broker’s commission. In order to help you find the best property, negotiate the best price and handle the operation, real estate brokers in Mallorca usually charge between 5% and 6% of the purchase price, which depends on the region, type of property, and complexity of the deal.

The brokerage fee is usually included in the selling price and specified in the written agreement between the seller and the real estate broker.

In any case, we recommend clarifying in advance whether you have to pay the brokerage fees and whether these are already included in the agreed purchase price or are offset against it.

5. DO I NEED A LOCAL LAWYER AND HOW MUCH DO THEY CHARGE?

Usually, the buyer’s lawyer prepares the private purchase contract, assists with NIE application, ensures that all mandatory documents are in place, provides documentation to the bank or mortgage broker, arranges the down payment, accompanies the buyer to the Notary, and translates documents if required.

Prior to the private purchase contract, the lawyer requests extracts from the property registry to compare the real state of the property with what is written in the registry and checks that there are no illegal extensions or alterations. The lawyer also investigates whether the property is free of any pending charges, liens, or encumbrances, which could affect you when purchasing the property.

Lawyer’s fees are usually up to 1% of the purchase price, although this depends on the complexity of the transaction.

Diana Díaz

Lawyer specialized in real estate law dianadiazasociados.com

Your life in Mallorca in the best hands

THE TRANQUILLITY OF EVERYDAY

We are pleased to introduce Anke Sevenster Agency as a provider of peace of mind. Professionals with more than 34 years of experience in the insurance industry have made it their mission to understand, advise and satisfy the personal and property protection needs of their clients.

In addition, with the new Anke Sevenster Services advisory service, clients will have at their disposal a whole catalogue of services and administrative procedures to make their life in Mallorca easier and without any worries.

With offices in Palma, Santa Ponsa and Llucmajor, its multilingual team will provide you with a personalised advice service in your language.

www.ankesevenster.com

6. WHAT IS THE SPANISH GOLDEN VISA PROGRAM AND WHO CAN MAKE USE OF IT?

Golden Visa, also known as the Spanish Investor Visa, is a residency by investment program, available to non-EEA citizens who want to acquire residency in Spain by investing in a company, purchasing a property, or creating employment opportunities.

By essence, a Golden Visa grants a right to legally reside in Spain in exchange for an investment into a real estate property or a few properties worth a minimum of €500,000. It is not legally required to live in Spain or visit the country regularly, therefore it is also common to acquire buy-to-let property and apply for the Golden Visa program.

By extension, a Spanish Golden Visa holder and all qualifying family members (spouses, children under 18, and parents that are financially dependent on the family) may opt to work and study in Spain without the need to further secure an additional work or study permit. Another benefit of the Spanish Golden Visa is that it permits mobility within other Schengen countries for up to 90 days in a 180 days period.

The Spanish Golden Visa can be renewed every two years. After five years it is possible to apply for permanent residency and after ten years for citizenship. It is not necessary to live in Spain in order to retain and renew the residency visa permit.

To qualify for Spanish Golden Visa you should meet all the following requirements:

• Be over 18 years old

• Have proof of making an investment or buying a property of a value not less than €500,000 (without financing)

• Obtain health insurance valid in Spain

• Have enough financial means to sustain yourself and any family members

• Have no criminal history in any of the places you lived before

• Not being in Spain’s list of undesirable people

• Have no records of prior rejected Schengen visas.

The information contained in this brochure is provided as is and without any warranties of any kind, whether expressed or implied, including but not limited to, implied warranties of satisfactory quality, fitness for a particular purpose and/or correctness. The contents of this brochure is for general information purposes only and does not constitute advice. One Smart Real Estate Group does not represent or warrant that the information and/or details contained in this brochure are accurate, complete or current. Therefore, One Smart Real Estate Group makes no warranties or representations regarding the use of the content, details, specifications or information contained in this brochure in terms of their correctness, accuracy, adequacy, usefulness, timeliness, reliability or otherwise, in each case to the fullest extent permitted by law.

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