The Costs Of Buying Property In The Balearic Islands
The additional costs of buying a property in Spain are typically around 12-14% of the property purchase price.
The cost will include:
1. The Property Purchase Price
That was agreed upon between you and the vendor.
2. Tax
When buying a new build or an “off-plan” property you have to pay IVA tax (the equivalent of the UK’s VAT) to the seller. IVA is currently 10% off this type of purchase). For the Balearic Islands, you should also expect to pay the IVA plus an additional 1% to the town hall.
For “second hand” properties you do not need to pay IVA but will need to pay the transfer tax Impuesto de Transmisiones Patrimoniales (ITP) to the local authority in the region where the property is situated. This is similar to Stamp Duty Land Tax in the UK and is usually 6-7% of the purchase price. ITP is calculated on the property purchase price and ranges from 7-10% in most parts of mainland Spain.
However, taxes in the Balearic Islands are different from those on the Spanish mainland in that the percentage chargeable increases in stages from 7-10% depending on the property price.
Tax rates increase progressively from 8% to 11% in the following way:
Up to €400,000 8% From €400,001 to €600,000 9% From €600,001 to €1,000,000 10%
Over €1,000,000 11%
If you are purchasing the property with a mortgage you may also have to pay stamp duty on the value of the mortgage. This tax varies by region (for example, between 0.5% and 1%).
There will also be the costs of a property valuation (approximately 500€) plus the costs related to the mortgage itself. These vary from lender to lender but are approximately 1%.
3. Legal Fees
Lawyer’s fees are usually charged as a percentage of the purchase price- typically 1-2%.
There may be an additional cost if a Power of Attorney is required. Your lawyer will advise you of their fees for this.
4. Notary Fees
The charges are fixed by law and the amount will depend on the extent of the legal provisions of the Title Deeds. Normally these total around 0.5%-1% of the purchase price. The Notary fees will be increased if you are funding the purchase by way of a mortgage.
5. Land Registry Fees
The fee payable will be dependent on the value of the property and the area it is in, but allow 0.5%- 1% of the purchase price.
6. Banking Costs
To pay for your property in Ibiza, you will usually be required to present a banker’s cheque. To do this, you will need to set up a Spanish bank account and transfer the funds across from your home country’s bank account. The cost of these transfers can be as much as 5% along with the cost of the Spanish bankers’ cheque of up to 0.5% of the cheque’s value. With careful planning, however, there are ways of reducing these costs to less than 1% in total.
The estate agent’s fees are usually paid by the seller and Estate Agents usually charge a percentage of the sale price – typically 3-5%.
