As a non Spanish resident, can I still buy a property in Menorca?

​

By all means, but the first thing you must do is apply for a 'Foreigner's Identity Number' or N.I.E (Número de Identificación para Extranjeros). This number is required for carrying out any financial transactions here and is issued by the Spanish Authorities. The process is straightforward and we can help you organise this.

​

What sort of charges can I expect to pay when buying a property in Menorca?

​

The two biggest expenses are firstly the Stamp Duty or Property Transfer Tax (Impuesto de Transmisiones) which range form 8% for properties up to 400.000€, 9% up to 600.000€ and 10% above that. 

​

Secondly, you'll need to include the Notary and Land Registry fees adding roughly 2% to the purchase price.

​

Obviously, if you need a mortgage, there'll be additional costs too, depending on the amount required, and, indeed, the prevailing deals on offer.

​

What's the Notary for?

​

In Spain a notary is essentially a public official who plays a neutral role in drafting and witnessing many types of contracts including the purchase-sales of property which is then inscribed in the Land Register. Their job is to ensure that both parties to an agreement understand the terms of the contract, and that these terms don't contravene any laws and ensure that the appropriate taxes generated by the transaction are settled.

​

Prior to this, however, a private sales contract is drawn up together with an agreed deposit in order to secure and reserve the property. As stated, the actual exchange of deeds is witnessed and signed by the notary.

​

Once I've settled on my choice property, what happens then?

​

This is the stage upon which the private sales contract is drawn up between the purchaser and the vendor where all agreed conditions including sales price and final exchange dates are detailed, signed and security deposit settled.

 

However, in order to formalise the details of the contract, a ‘nota registral’ is requested from the Land Registry Office to check the legal status of the property being sold. This shows the details of the property and also any mortgages or outstanding charges on the property.

​

How much deposit am I expected to lay down?

​

A 10% deposit is generally considered the norm. However, this can be freely negotiated by the two parties involved. In order to avoid gazumping, which in a buoyant market becomes increasingly prevalent, the higher the deposit the better. Under Spanish law, if a vendor decides to accept a better offer, or, indeed, pull-out of the sale, for whatever reason, he or she is legally obliged to return double the agreed deposit.

​

Similarly, you, the buyer, can break the contract and pull-out of the sale, but you will loose your deposit. It is firmly stated in the sales contract that the deposit is non-refundable.

​

How long can I expect to wait for completion?

​

Completion can be as quick or a slow as both parties wish. However, under normal circumstances, most complete within two months; logically this very much depends on each individual circumstance. For example, some properties are unable to complete quickly owing to summer rental obligations previously engaged in by the vendors, in which case, this could take as long as six months. However, in a situation of a property being empty, or, for example,  requiring no mortgage, completion can be as quick as a couple of weeks.

​

So what happens if there's an existing mortgage on the property?

​

Well, that leaves us two options: you can simply take over the mortgage, together with the associated conditions - generally a cheaper option than setting up a new mortgage - or, if the purchaser either doesn't need a mortgage or prefers to set-up a new one, the mortgage is simply cancelled at the same time as the exchange of deeds. At the Notary, the bank holding the existing mortgage collects the corresponding cheque for the cancellation amount, and then signs a cancellation deed. This is then forwarded to the Land Registry Office to be removed from the records.

​

Do I have to pay any Rates?

 

Every property is subject to a rateable value depending on the location and its size. A copy of the rates receipt is shown at the Notary office to prove payment. The rates year runs from January through to December and so it's normal practice to split the cost on a pro-rata basis depending on the completion date.

 

Non-residents are also required to pay a yearly property tax, which again is calculated depending on the value of the property.

​

What about utility bills?

 

Once the property has been signed over at the Notary, all utilities contracts are set-up in your name and are charged as a direct debit to your account. 

 

 

 

 

SELLER'S GUIDE

 

​

Is Capital Gains Tax (CGT) applicable and how much is it?

 

Well it depends:

 

CGT is applicable in Spain, only if the property is a second residence (in other words, not your main residence). In this case it is levied at 19% of net profit. Profit is calculated as the difference between the original purchase price plus the corresponding costs (taking into account all deductions and allowances) and the sales price.

 

Tax exemption on 'main residences' is briefly covered below.

​

Withholding tax for non-residents

 

The CGT takes several weeks to be processed and calculated and so for non-residents, on the day of completion, 3% of the sales price is automatically withheld - this is CGT withholding tax retention (to cover the vendor’s capital gains liability). So, if you're a non-resident vendor you don’t get your hands on all the money until long after the Spanish tax man is satisfied that all tax has been paid.

​

If this amount transpires not to be sufficient, the difference must be settled. Alternatively, if this amount is too much, any difference is refunded to the vendor's bank account. The refund can take up to 12 months. 

​

Tax relief for 'Main Home' Residents

​

If you are a resident of Spain, and you sell your 'main home' (meaning that you have lived in it permanently for the last 3 years) you are exempt form CGT. But, you have two years to reinvest the sales proceeds into a new main home. This new home does not necessarily have to be in Spain, but, it must be in an EU or European Economic Area (EEA) country. Remember, for those wishing to buy in the UK, depending on how the Brexit negotiations pan-out, post-Brexit could mean that repatriating funds to purchase a new main property in the UK annuls this tax relief.

​

CGT exemptions for taxpayers over 65

If you're over 65 and resident in Spain and sell your property (assuming it's been your main home for more than three years) you're not subject to any tax on the gain even if you don't re-invest the proceeds in another property.

​

What other taxes are there?

​

The 'Plusvalía' tax

 

The 'Plusvalía' - often misunderstood as a Capital Gains Tax - is in fact a local (municipal) tax charged by the Town Hall on sold properties. So, just to re-cap, CGT is paid to the regional Authorities and the "Plusvalía" is levied by the Town Hall. It's calculated on the property's rateable value and the number of years that have passed since the property last changed hands. The objective is to tax the increase in the value of the land on which the property stands, some of which is due to improvements to the area carried out by the local government and the community at large.

​

By law, you, the vendor, are required to pay this tax, though both parties are free to negotiate. This is largely dependent on the state of the market; for example, in a seller's market the vendor is more likely to be able to command the controlling hand and insist on the purchaser covering it. 

​

It's worth noting that as of February 2017 Spain's Constitutional Court declared that the 'Plusvalía' property tax can no longer be levied when the property is sold at a loss... so, no profit, no taxation!

​

How long will completion take once I've found a buyer?

​

Completion very much depends on the agreement made between the two parties and can be as quick as a few weeks. If there are rental agreements or mortgages to be sorted out, it can take longer.

​

Who draws up the sales contract?

​

This can either be drawn up by our own recommended lawyers or any of your own choice. In any event, we would always suggest you use a local lawyer since they're generally a lot more likely to expedite the process.

​

Having received the buyer's deposit, can I change my mind?

​

Yes you can, but bear in mind you are legally bound to compensate the buyer by returning double the amount deposited.

​