Buyers Guide for buying property in Majorca, Spain

Tax On Rental Income:
Rental income is subject to 25% of gross rents without any deductions.

Wealth Tax:
Spanish Wealth tax is levied on Spanish Assets of non-residents without any exempt amount. Spanish residents enjoy a nil band of more than Euro 100,000! So, any value of Spanish property will be subject to at least .2% and up to 2.5% wealth tax (although this latter rate kicks in at over Euro 10 million.). This is added to the rental income tax and paid at the same time.

Capital Gains Tax:
In order to comply with EU non-discrimination regulations, capital gains tax  rates for both residents and non residents were equalised from 1st January 2007 onwards.

18 % tax is payable on the capital gain.

For properties purchased after 1986, 3% of the declared sales price is withheld from the vendor at the point of sale.  This is paid by the purchaser (normally via their solicitor) by submitting form 211, within one month of the sale.

The balance of tax payable / reclaimable is settled by the vendor on submitting form 212, within a further two months.

Inheritance Tax:
This tax is levied based on the relationship of the beneficiary to the deceased. For a Spouse, there is an exempt amount of just Euro 16,000 and then tax at progressive rates from 7.65%- 34%. For unmarried beneficiaries such as girlfriends and friends, there is NO EXEMPT amount and rates up to 81.6%!

Local property tax- Impuesto Sobre Bienes Inmuebles (IBI)
This is an annual tax based on the Cadastral Value of the property.
The rate varies according to the local authority, typically 0.5% to 1%.