Selling a property in Mallorca

Selling in Spain as a non-resident carries one mechanism with no equivalent in most other countries, and it catches sellers who have budgeted only for the agency fee.

The three per cent retention

When a non-resident sells Spanish property, the buyer is legally required to withhold three per cent of the purchase price and pay it directly to the Spanish tax authority on the seller’s behalf.

You do not receive it at completion. It is paid over on form Modelo 211 and it functions as a payment on account against the capital gains tax you will owe.

Two consequences follow.

If your actual gain is small — or if you are selling at a loss — the retention may exceed the tax due. You can reclaim the difference, but you have to file for it, and refunds are not quick. Sellers who did not expect this find three per cent of the sale price sitting with the tax authority for months.

And if you were relying on the full proceeds to fund an onward purchase, the timing matters. Budget the sale on ninety-seven per cent.

Capital gains

The gain is the difference between your acquisition cost and your disposal proceeds, and both sides can be adjusted.

On the acquisition side, the purchase price plus the transfer tax, notary, registry and legal fees you paid when you bought. On the disposal side, the costs of selling. Documented improvement works may be added; routine maintenance may not, and the distinction is one a Spanish tax adviser should draw rather than you.

This is the argument for keeping every invoice from the day you buy. Sellers who kept their completion file and their builders’ invoices pay tax on a smaller gain than sellers who did not — the same transaction, a different tax bill, decided years earlier by whether someone kept the paperwork.

The rate applied to non-resident capital gains is set nationally and has moved in recent years, which is why this page describes the mechanism rather than quoting a percentage.

The reliefs that exist are mostly for residents. Rollover relief where the proceeds are reinvested in a main home, and the exemption available to sellers over sixty-five, are attached to Spanish tax residence and to the property being the main residence. A non-resident selling a holiday home generally has neither available. Where the property came to you by inheritance, the acquisition value is the one declared for inheritance tax, not what the deceased originally paid.

Plusvalía municipal

Separately, the municipality levies a tax on the increase in the land value over your period of ownership — plusvalía municipal, formally the IIVTNU.

It is normally paid by the seller. It is calculated by the town hall on the cadastral land value and the years held, and the method of calculation was substantially reformed after the Spanish courts struck down the previous formula. Where there was no real increase in value, there are now grounds to challenge or avoid the charge — a point worth raising rather than paying by default.

What it costs to sell

Agency commission is the largest line and is negotiable. On Mallorca it is customarily borne by the seller and quoted as a percentage of the sale price, plus VAT.

Then plusvalía, your own legal fees, the energy performance certificate if you do not have a current one, and the cost of cancelling any mortgage still registered against the property. Notary and registry costs at completion fall mainly to the buyer, though the deed usually apportions a share.

The mortgage that was paid off years ago

A trap specific to sellers, and a common one: repaying a Spanish mortgage does not remove it from the Land Registry. The charge stays registered until it is formally cancelled, which requires a notarial deed and a registry application.

Sellers discover this when the buyer’s lawyer pulls the nota simple and finds a mortgage that was cleared a decade ago. It is fixable, it takes time and money, and doing it before marketing costs far less than doing it against a completion date.

What a buyer’s lawyer will ask for

Preparation shortens a sale, and on Mallorca one item does more damage than the rest when it is missing.

Expect to produce the energy performance certificate, which is required before marketing; proof that IBI is paid up to date; community fee statements and a certificate that nothing is outstanding; the cédula de habitabilidad; utility contracts and recent bills; your original purchase deed; and your NIE, which you will still need even if you have not used it in years.

Then the one that matters most here: documentation that what stands on the ground matches what is registered. Rural Mallorca is full of extensions, pools and annexes built years ago and never declared. A buyer’s lawyer will find the discrepancy, and it will either reduce your price or end the sale. If it exists, the time to deal with it is before the property is on the market, not during a negotiation.

The agency mandate

You will be asked to choose between an exclusive mandate and an open one, and the choice is less obvious than it looks.

An open mandate feels safer — several agents, more exposure. In practice it can produce the opposite: the same property advertised at different prices by different agents, which tells buyers the price is soft before anyone has viewed it, and no agent with enough stake to invest in presenting it properly.

An exclusive mandate concentrates responsibility. It is worth giving only against something specific — a marketing commitment, a defined term, and a clear account of where the property will actually be shown.

Read what the mandate says about commission if you find a buyer yourself, and about what happens when it expires.

Selling without being there

You do not need to be on the island for completion. A power of attorney granted to your lawyer, signed before a Spanish notary or before a notary at home with an apostille and sworn translation, allows the deed to be signed on your behalf.

Given that the tax filings follow the sale by months, appointing a fiscal representative in Spain at the same time is usually sensible.

Pricing, and why the season matters

Mallorca buys and sells on a season. Serious international buyers view heavily from spring into early autumn, and a property launched in November has often lost momentum by the time the market returns.

Valuation should come from recorded sales in your own municipality rather than from asking prices on portals. Asking prices tell you what sellers hope for; registered transactions tell you what buyers paid. The two diverge more in this market than in most.

After completion

The sale is not finished at the notary. Your capital gains return falls due within a defined period after the deed, and any refund of the retention is claimed through it. Plusvalía is filed with the town hall on its own deadline.

Cancel the utility direct debits and the community membership, and tell your insurer. And keep the file: the return may be assessed long after the money has been spent.

Frequently asked questions

What is the three per cent retention?

Where the seller is non-resident, the buyer must withhold three per cent of the price and pay it to the Spanish tax authority as an advance against the seller’s capital gains tax. Any excess is reclaimable, but only by filing for it.

Can I reclaim the retention if I sold at a loss?

Yes. You file to recover the difference between the retention and the tax actually due. Expect the refund to take time.

Who pays plusvalía, buyer or seller?

Normally the seller. It is a municipal tax on the increase in land value over the ownership period, separate from capital gains tax.

What can I deduct from the gain?

Broadly, the acquisition costs you paid when buying, the costs of selling, and documented improvement works. Routine maintenance generally does not qualify. Keep the invoices — this is decided by your paperwork.

Do the over-65 and reinvestment exemptions apply to me?

Generally not if you are non-resident and the property is a second home. Both reliefs are tied to Spanish tax residence and to the property being your main residence.

My Spanish mortgage was repaid years ago. Is that a problem?

It can be. Repayment does not remove the charge from the Land Registry; formal cancellation does. Deal with it before marketing rather than under a completion deadline.

Do I need an energy certificate to sell?

Yes. It is required before the property is marketed, not at completion.

Can I sell without travelling to Spain?

Yes, through a power of attorney granted to your lawyer. Appoint a fiscal representative at the same time, since the tax filings follow the sale by months.