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Legal Department

ALWAYS ON THE SAFE SIDE - LEGAL DEPARTMENT

We have an excellent relationship with top law firms in Majorca specialised in real estate laws and regulations.

You will be offered expert advice from specialised lawyers who offer friendly and efficient services. Our recommended lawyer firms specialise in foreign investment in Spain, and deal with EU citizens as well as citizens from other countries.

Important information for prospective buyers:

Real Estate Transfer Tax

Impuesto sobre Transmissiones Patrimoniales

I. The property transfer tax for resale properties is paid by the purchaser.

The tax ranges from 8% to 11% in the Balearic and it depends on the purchase price as shown in the public deed. For example: 8% is due to be paid for the purchase of a property up to 400.000 €. 9% will be paid for the difference between 400.001 €to 600.000 €, 10% from 600.001 € to 1.000.000 € and 11% above 1.000.000 €.

II. The property transfer tax for newly – built properties is also paid by the purchaser

The tax is applied on the purchase of newly built properties, which are bought directly from the developer. In this case the purchaser must pay IVA (or VAT) of 10% instead of paying the normal property transfer tax. There is also a stamp duty (or IAJD) of approximately 1.2%, which must be paid on top of the purchase price.

III. The increase of the land tax – Plusvalía Municipal

The ‘Plusvalía Municipal’ is a tax on the increase of the value of the ground the property occupies. On rustic land the calculation is based just on the ground floor area the property occupies. The tax for urban properties is for the entire land.

The plusvalía is calculated on the basis of 3 factors: the period of ownership, the location of the property and the cadastral ground value.

The plusvalía tax is paid by the vendor.

Capital Gains Tax

When selling a property we are required to pay a tax on the gains. For non-residents there will be a prepayment required which represents 3% of the purchase price. It will retained from the sales price at the Notary and is then payable to the Treasury when presenting the tax form ‘Modelo 211’.

The Treasury then calculates the exact amount payable for capital gains tax. In the event that the amount withheld of 3% is higher than the result of the calculations, the difference will be rebated to the seller (for which you need to fill in the tax form 211). But if advance payment is less than the amount calculated by the Treasury, the difference has to be credited to the Treasury’s account.

Petitions on deductible amounts will be dealt with depending on the requirements the Treasury has in regards to previous payments of income tax by Non-Residents. Amounts due are deducted from tax relief, including fines and interests.

The capital gain on real estate is also paid in Germany. However, in accordance with the agreement between the two countries in order to avoid double taxation, taxes paid in Spain are deductible from the German tax return.

Residents who have lived in their property for sale in Spain for three years and use the sale proceeds to acquire other property as a residence within a specified period, or those over 65 years old are usually exempt from this tax.

Inheritance Tax

This tax is required by residents and non residents. The non-resident direct heirs or those who have lived less than 5 years in Spain may deduct just under 16,000€ per heir. The remaining value of the estate is taxed between 7.65% and 34%. Indirect heirs must pay a much higher inheritance tax.

Each region has its specific regulations regarding inheritance taxation for residents.

It is advisable to make a will before a notary. Non-residents can only bequeath about their inheritance in Spain. Thus, the process of inheritance assumption is considerably abbreviated, specially because in this case the heirs certificate by the German authorities is no longer required.

All information herein stated is based on the legislation in force which is regularly updated. Consequently, each situation requires individual and customised advice.

I am interested in receiving legal advice from one lawyer or tax advisor. Please contact me with further detailed information.

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