What are the running costs of owning property in Spain?
Anyone buying property in Mallorca should be well aware of the running costs and recurring taxes.
The first tax that is levied is land tax, which is payable on an annual basis. It is levied by the community and depends on the property’s cadastral value, which differs from one community to the next. Generally, it is roughly between 0.4% and 1.1% of the cadastral value, which takes into account both the value of the land and the value of the building on it, depending on the type, location and type of utilization.
Anyone who uses their property in Mallorca themselves also has to pay a simplified income tax to the Spanish financial authority. In tax terms, utilization of a property is considered rental income. It is calculated with a fictitious usage value of either 2% or 1.1% of the cadastral value, depending on whether that value was determined before or after 01/01/1994. Of this assessment basis, 24% are levied as income tax.
Both residents and non-residents are subject to wealth tax. The amount of wealth tax for residents is determined by the person’s worldwide net worth on 31 December of each calendar year. Non-residents, by contrast, are subject to limited tax liability, meaning that taxes are only levied on those goods and rights located and used in Spain. Real estate valued up to EUR 300,000 is exempt from wealth tax, other assets are exempt up to a value of EUR 700,000.
Apart from recurring taxes, there are also running costs for things like water, waste disposal, energy, insurance and property maintenance.
Municipal fees for waste disposal are determined by the communities depending on location and are payable every six months. Fees for an apartment are generally around EUR 150 to EUR 180. For a larger Villa, you should expect proportionately higher fees.
Owners who hire full time domestic help will need to pay wages between EUR 900 and EUR 1,400, plus a flat fee for social insurance of about EUR 160 per employee. Part time help, by contrast, is paid by the hour at an average hourly rate of EUR 10 to EUR 15.
Gardeners working for an hourly rate usually charge an average of EUR 15 to EUR 20. The monthly salary of a full-time gardener is about EUR 1,100 to EUR 1,400 plus about 40% incidental wage costs. For apartments and townhouses, care of the shared gardens is part of the shared costs.
Water consumption is determined every three months by means of water meter readings, while electricity is charged every two months. For electricity, there is always a base charge – even when the property is not being used. This base rate is calculated using a factor of the electricity consumption that could theoretically be reached if the property were using energy at full capacity.
Contributions to the owners’ association
A housing owners association is an association of individuals consisting of the owners of apartments within a building, or by the owners of houses within a housing estate. The association is responsible for the ownership as well as maintenance and upkeep of the shared areas of a building or housing estate. Costs incurred are divided proportionally. In addition, a budget for the association’s annual expenses is defined at an annual owner’s meeting. This budget is used, among other things, to pay the salary and social insurance of the caretaker, the care of gardens, maintenance of lifts, building repairs, waste disposal, water for irrigation of the gardens, power for illumination of common areas, building insurance, security systems and administrative costs.