Buying a property in the Balearic Islands involves a series of taxes that vary depending on whether it is a new or second-hand property. Understanding these tax differences is key to planning the operation and avoiding unexpected costs.

1. Taxes on the purchase of a new property in the Balearic Islands: VAT and AJD (Spanish Value Added Tax)

The purchase of a new home -first transfer from the developer to the buyer- is subject to:

- VAT in the Balearic Islands: general rate of 10%. A reduced rate may be applied to social housing.

- AJD in the Balearic Islands: Actos Jurídicos Documentados (Stamp Duty), applicable to the deeded price. The rate varies according to regional regulations and the characteristics of the buyer.

2. Taxes on the purchase of a second-hand property in the Balearic Islands: ITP (Property Tax)

Second-hand properties are subject to Transfer Tax (Impuesto sobre Transmisiones Patrimoniales, ITP). In the Balearic Islands:

- The tax is calculated on the declared value or the reference value, whichever is higher.

- The tax rates are progressive: the higher the price of the property, the higher the tax.

- There are discounts and reduced rates for certain groups, such as young people, large families or those acquiring their main residence.

3. Tax comparison: new vs. second-hand properties in the Balearic Islands

- New housing usually implies a higher tax burden due to the effect of VAT.

- Used properties can be cheaper, except in the higher ITP brackets.

4. Key factors influencing real estate taxation in the Balearic Islands

- Cadastral reference value: a decisive element that affects the taxable base of the ITP and AJD.

- Buyer's profile: certain personal circumstances can significantly reduce the tax burden.

- Type of operation: even recent properties can be considered used if it is not a first transfer.

In addition to taxation, every buyer has to take into account other expenses associated with the purchase, such as the Notary Public's bill, the Land Registry bill, the administrative fees, as well as the verification of the state of construction of the property being purchased.

Knowing the taxes applicable to the purchase of a property in the Balearic Islands, as well as other expenses that the buyer assumes when purchasing a property in the Balearic Islands allows the process to develop without surprises, offering an experience as pleasant as the Mediterranean life that attracts both national and international buyers.

Contact our team at PALMER LEGAL to clarify any doubts you may have on this subject.