As part from recent efforts to address the housing shortage, a new law (Law 3/2024, effective November 9, 2024) introduces long-overdue regulations for real estate agents in the Balearic Islands. Here’s what this means for buyers and sellers, and why this is a positive step for the property market.

Raising Standards and Pushing Out Rogue Agents

The new regulations are designed to improve the quality of service provided by estate agents and to protect clients from unethical practices. One key requirement is that all estate agents must now maintain a publicly accessible office, providing clients with a physical address for inquiries or complaints. This move will significantly impact agents who previously operated solely online or via telephone, ensuring greater accountability.

Additionally, a new official registry for estate agents, the Registro Oficial de Agentes Inmobiliarias de las Illes Balears, has been established. This registry enforces strict eligibility criteria, requiring agents to hold specific qualifications or demonstrate substantial professional experience. Those without a university degree in law, engineering, or architecture must complete at least 200 hours of accredited training or prove four years of experience in the field.

Agents are also required to obtain liability insurance and post a security deposit of €60,000, further increasing consumer confidence. To ensure transparency, every registered agent must display their registration number on all marketing materials.

Clearer Contracts and Reduced Disputes

The new regulations also bring clarity to how estate agents work with property sellers. Under the law, agents must sign a formal agency agreement with the seller, ensuring all relevant property documentation is disclosed upfront.

This measure addresses a common issue in the Balearics, where sellers often list properties with multiple agents. In the past, disputes over commission payments sometimes arose when deals were finalized. The new requirements aim to create a more transparent process, reducing conflicts and ensuring smoother transactions.

The Role of Lawyers in Property Transactions

While these new regulations elevate the professionalism of estate agents, buyers are still encouraged to seek independent legal advice when purchasing property. Lawyers play a vital role in assessing the legal and tax status of a property, ensuring it is free of encumbrances before purchase. Their independent perspective is invaluable, as they are paid to act solely in their client’s best interests—even if that means advising against a purchase.

Why This Law Benefits Everyone

At Villa Contact, we welcome this much-needed regulation. As one of the founding members of the Association of Real Estate Agents of Ibiza (APIBIZA) founded in 2015, we have been advocating for industry standards and professionalism for many years. This law represents a significant milestone in ensuring that clients can navigate the property market with confidence and security, free from the risks posed by unregulated agents.

Ready to Buy or Sell in Ibiza? Partner with Villa Contact

With decades of experience and a commitment to excellence, Villa Contact is here to guide you through every step of your property journey in Ibiza. Whether you’re buying your dream home or selling your cherished property, our expertise and dedication ensure you’re in the best hands.

Contact us today to explore your options and let us help you in find your dream home in Ibiza!

Understanding what costs you can deduct, the timing of payments, and the current tax rate are all vital in ensuring you fulfil your tax obligations correctly and optimise your financial outcome. Our guide will break down what you need to know about CGT in Spain, particularly if you’re a non-resident.

What is Capital Gains Tax in Spain?

Capital Gains Tax is levied on the profit made from selling assets, such as property. In Spain, non-residents are subject to CGT on the sale of Spanish property at a flat rate. This is calculated as the difference between the sale price and the original purchase price, factoring in deductions which we’ll go through below.

How Much Capital Gains Tax Do Non-Residents Pay?

The current CGT rate for non-residents selling property in Spain is set at 19%. This rate applies exclusively to non-residents, regardless of their country of origin. For residents, however, CGT is progressive, with different rates depending on the profit made.

Deductible Expenses to Reduce Your Taxable Gain

Certain expenses incurred during the purchase and sale of a property are deductible, which can help reduce the tax base on which CGT is calculated. Here’s a list of the main deductible expenses:

• Notary and land registry fees: These are usually only deductible if they were incurred when purchasing the property.
• Lawyer fees: Deductible when associated with both the purchase and sale of the property.
• Estate agent fees: Commissions on the sale can be deducted.
• Taxes paid during purchase and sale: The transfer tax (Impuesto de Transmisiones Patrimoniales or ITP) if applicable, or VAT (IVA) for new properties, can be deducted from the purchase. Additionally, the Plusvalía Municipal tax paid on the sale of the property can be deducted.
• Property improvements: This category can be a bit tricky. While the Spanish tax authority is strict about distinguishing between simple renovations and value-adding improvements, extensions like building a pool or a terrace may qualify as deductible, especially if backed by official planning permission.

Something to note: routine renovations, such as repainting or updating a bathroom, generally do not qualify as deductible, as they are considered maintenance rather than enhancements that add significant value.

When Do You Need to Pay Capital Gains Tax?

After the sale of a property, non-residents have four months from the date of sale completion to submit their CGT declaration and pay any tax due. Meeting this deadline is crucial to avoid penalties or interest.

Do You Have to Pay CGT in Your Home Country?

In some cases, you may be liable to pay CGT in your country of residence, depending on its tax laws. To avoid double taxation, Spain has tax treaties with many countries, including the UK. However, consulting a tax professional in both Spain and your home country is wise to understand any cross-border tax obligations or credits that may apply.

How to Manage Capital Gains Tax as a Non-Resident

1. Make sure to plan ahead for renovations and improvements: Ensure you have proper documentation, permits, and receipts for any significant property enhancements you wish to claim as deductions.

1. Understand tax treaty benefits: Check with your home country’s tax authority or a tax advisor to see if there are bilateral treaties to help avoid double taxation on your gain.

1. Seek professional guidance: Spanish tax law, especially for non-residents, can be intricate, and consulting with an expert can help you make the most of your deductions and comply with all tax regulations. 

Selling a property in Spain as a non-resident comes with specific tax responsibilities. While the CGT rate is a flat 19%, being aware of the deductible expenses and the timing of payments can significantly impact your tax bill. With good preparation and expert guidance from Villa Contact, you can navigate Spain’s Capital Gains Tax efficiently, keeping your finances and compliance on track.

Whether you are a property owner in the Balearics, or looking to purchase, this new law could benefit you.

Here’s a detailed look at the key points and implications of this new legislation:

Illegal constructions on rural land have been a persistent issue in the Balearic Islands. Previous attempts to address these irregularities have met with limited success, often leaving property owners in legal limbo. The new decree represents a significant step forward by providing a structured and clear pathway for legalisation, building on past efforts and lessons learned.

Scope and Objectives

The decree targets buildings on rural land that are over eight years old from the date the law comes into effect. This includes primary structures as well as extensions, swimming pools, and porches added without authorisation. The objective is to bring legal clarity to numerous properties that were previously in a grey area due to various infractions.

Legalisation Process

Property owners have a three-year window to regularise their properties. They must apply for legalisation and pay the associated fees and taxes as if constructing new buildings.

It’s important to know that there is a penalty on the value of the work to be legalised, structured as follows:

10% of the value if legalised in the first year.
12.5% of the value if legalised in the second year.
15% of the value if legalised in the third year.

To ease the financial burden, there are bonuses for lower incomes: a 50% reduction for incomes below €33,000 per year and a 25% reduction for incomes up to €52,800 per year.

Detailed Steps for Legalisation

Consultation: Begin by consulting with a legal expert to understand the specific requirements and steps for your property.

Documentation: Prepare all necessary documents, including proof of property age and any previous planning permissions.

Application: Submit an application for legalisation to the relevant local authorities.

Fees and penalties: Pay the required fees and penalties based on the timeline of your application.

Compliance: Ensure your property meets all technical and environmental standards, such as adopting energy-efficient measures.

Restrictions and Exclusions

Properties legalised under this decree will never be eligible for a tourist rental license, ensuring that the process does not encourage an influx of tourist accommodations in rural areas. Excluded from this legalisation are agrotourism establishments, rural hotels with illegal constructions, and constructions in areas designated for public use or those subject to expropriation. Buildings on protected rural land (ANEI) can only be legalised if they were built before the relevant land management laws came into force.

For Example…

If you owned a rural property with an unauthorised swimming pool and extension, under the new law, you could apply for legalisation within the three-year window, pay the associated fees and penalties, and ensure the property complies with environmental standards. This process brings the property into legal standing, making it more attractive to potential buyers.

The new law is expected to positively impact the property market by increasing the value and marketability of fully legalised properties. Buyers will have more confidence in properties with clear legal status, potentially driving demand and prices higher in the rural property market.

Our Advice for Property Owners

Consult with legal experts. Seek advice from legal professionals specialising in urban planning to navigate the legalisation process effectively.

Prepare financially. Understand the costs involved and prepare for the financial implications of legalisation.

Act promptly. Take advantage of the three-year window to avoid missing the opportunity for legalisation.

The long-term impact of this law includes a more regulated and orderly rural landscape in the Balearic Islands. It sets a precedent for other regions facing similar issues and contributes to sustainable rural development by enforcing environmental and technical standards.

How Villa Contact can help

We can assist property owners through the legalisation process.

Our consultation service can help you assess the feasibility of legalisation of your property, and we can help prepare and submit the necessary documents and applications. We are happy to connect you with legal help, to ensure your property meets all technical and environmental requirements, as well as advising on the potential increase in property value post-legalisation and assisting with the sales of your property if desired.

By partnering with us, you can navigate the complexities of the new law with confidence and ensure your property is brought into legal compliance effectively.

Contact us today to find out more.

Have you been dreaming of crystal clear waters, rich cultural experiences, beautiful countryside, incredible gastronomy and stunning sunsets? It’s all part of a fulfilling life on the island of Ibiza.

Securing a long-term visa in Spain in order to stay on the island permanently can often be a lengthy and uncertain process. Enter the Golden Visa. There are a few different ways to secure a Golden Visa, one of which is by purchasing property, and we thought it would be a good idea to delve into some of the details so that you can be in the know. So, firstly…

What is the Spanish Golden Visa?

The Spanish Golden Visa is a special program for non-EU investors who are not part of the European Union (EU), European Economic Area (EEA), or Switzerland, offering a chance to acquire residency in Spain in return for significant investments, primarily in the real estate sector.

It launched in 2013 as an initiative to boost the Spanish economy by attracting foreign investment. Just think of it as Spain’s way of saying “gracias” to those who bring their talent and money to the country.

The benefits of the Golden Visa in Spain.

1. High investment value, higher returns
Unlike some other countries, Spain requires a heftier minimum investment for its Golden Visa program, which is anything above €500,000 in real estate. But there is a silver lining, as a high investment demand is seen as a sign of stability and security.
Currently, Spain’s real estate market is booming with opportunities, from luxurious villas to commercial properties, so you will most definitely be able to find your dream property in Ibiza.

2. Experience Spain, no strings attached
One of the standout features of this initiative is the optional residency requirement. In a nutshell, this means you don’t need to live in Spain full-time to maintain your visa status. It’s perfect for those who want to keep their home base elsewhere but still fancy regular trips to the White Isle.

Frequently Asked Questions

What are the requirements for a Spanish Golden Visa?
To qualify for Spain’s Golden Visa, aside from the investment criteria, applicants must also meet the following conditions:

– Be at least 18 years of age.
– Hold health insurance from a provider approved to function in Spain, whether it’s public or private.
– Demonstrate adequate financial resources to support oneself and any dependents while residing in Spain.
– No prior denials for entry from any Schengen zone countries.
– No illegal entries or stays in Spain.
– Ensure a clean criminal background, both in Spain and in their home country, for the past 5 years.

Does the Spanish Golden Visa last forever?

In a word, no. The Golden Visa offers non-EU individuals a 3-year visa or residence permit in Spain. Even if you aren’t residing in Spain full-time, the Golden Visa can then be renewed for an additional 5 years, as long as you visit at least once per year.

What fees are involved?

Currently, the Golden Visa application fee for property investments stands at €1,910. If you’re including family members, it’s an extra €1,202 each. On top of that, there are usual legal fees: about €8,000 for an individual, €10,500 for a family of four, and a further €2,500 for every renewal.

What about taxes?

When applying for the Golden Visa in Spain, be mindful of taxes like Foreign Income Tax, Personal Income Tax, Property Tax, and Capital Gains Tax.

Do I have a say in the type of property I invest in?

Absolutely! Whether you prefer a residential home, commercial spaces, villas, or a mix of these, the choice is yours. Just ensure your total investments meet or surpass the threshold.

Can I spread my investment over multiple properties?

You can split your €500,000 across various properties, letting you explore different areas and property types in Ibiza, the Balearics or mainland Spain.

How can I start the process of obtaining a Spanish Golden Visa through property?

At Villa Contact, we can help you find the perfect property or properties to meet the threshold all whilst meeting your needs.

Contact us to get started.

The most recent development in the local system is the Property Transfer Tax that has been leaving buyers and sellers confused about the tax amount they’re supposed to pay. In this guide we get to the bottom of this new tax rule and ensure you’re fully equipped with the knowledge and tools to sail through the law complexity when making your new investment. 

First and foremost, what is the Property Transfer Tax?

Known as ​​Impuesto de Transmisiones Patrimoniales (ITP), the Property Transfer Tax is an indirect tax a homebuyer pays when purchasing a resale property in Spain. To put it simply, it’s the equivalent of stamp duty in UK, although considerably higher. In Ibiza the sliding scale ranges between 8 to 11%.

What are the latest changes in the tax law?

Until the beginning of January 2022, the taxable value was calculated based on the actual price paid for the property. However, the brand new changes in the tax system introduced a new way of calculating the ITP – Reference Value or Valor De Referencia Del Inmueble that is based on the ‘recent transactions in the municipality where the property is located’*. As a result, homebuyers have no clear overview of how high their ITP will be as it’s no longer based on the value of the property being transferred.

According to this source, many buyers have been presented with inflated tax bills based on the new Reference Value, in some cases double the property’s actual value. Another tricky part is that the Reference Value is updated yearly based on the area’s sale values. Therefore, the ITP continues to fluctuate.  

How to check the current Reference Value?

You can check the latest reference value on the Cadastre Electronic website, available only in Spanish. Thus for absolute clarity, we highly recommend getting in touch with one of our advisors to help you assess the property and plan your purchase or sale accordingly.

It’s also important to keep in mind that the new Reference Value is different from the Cadastral Value which still remains and takes in consideration the location, age, quality of the property and any renovations that have been previously done. The new Reference Value is likely to be higher than the Cadastral Value. 

Final Thoughts on The Property Transfer Tax 

The current and future homeowners must plan their budget accordingly, taking the newly introduced changes into account. We’re true believers that the complex Spanish tax system should not stand in the way of making Ibiza your home. With good support from the right team and a clear understanding of the intricate details of the local laws, you will be able to make intelligent decisions with your next investment.   

Additional sources:

Changes to property transfer tax – New reference value in Spain 

https://www.spanishpropertyinsight.com/2022/04/21/house-buyers-getting-inflated-tax-bills-based-on-new-reference-value-used-to-calculate-itp-transfer-taxes-on-property-sales/ 

Las surrealistas tasaciones de Hacienda: valora inmuebles hasta un 68% por encima del valor de compra