Spain is one of the most popular destinations for Brits looking to buy a property abroad but Majorca and Ibiza are going to see a new tax system from the 1st of May.
At the moment tax on purchases of property is set at a standard 7% but from May 1st the resale tax, charged to the purchaser will be tiered. The first €300,000 of a resale property will be taxed at 7%, the next €200,000 at 8%, the next €200,000 at 9% and anything in excess of €700,000 at 10%.
This tax is aimed at raising more from the buying and selling of luxury properties but it only applies to resale properties. New properties will be exempt from this Property Transfer Tax (ITP) and will be charged IVA which has been reduced from 8% to 4% in an effort to inject life into the property market.
The average resale price of a property is between €500 000 and €700 000 meaning that the new tax increase will be 2% or €12,000 on the average purchase. So a new property in Majorca could save you over €6000 in taxes when compared to an older one.
There are only a few days left before this tax comes into effect and "buyers would do well to push through any transactions prior to that date." said Stephen Dight, Managing Director of Sotheby's in Majorca.
Mr Dight's advice is to “take advantage of sterling’s high currency exchange rates before local tax changes” April saw the UK pound hit a 19-month high to make it worth 1.217 Euros, its highest level since September 2010.
As ever there's plenty to think about when buying a property abroad. Have a look at our Mallorca Property : Living in Mallorca page for more info.