Property purchases by millionaires boosts Government's revenues

Luxury home transaction tax to go up to 11.5%

Those who buy a luxury home this year will pay more money to the Government. The transfer tax rises half a point and buyers of properties worth more than one million euros will pay 11.5% tax. | EFE

Majorca Daily Bulletin reporterPalma07/02/2022 08:49

The Tax Agency of the Balearic Islands last year received 688.39 million in taxes from the purchasing of second-hand home. Most of the income corresponds to luxury real estate transactions, those over one million euros, which in 2021 paid 11% in taxes, mostly carried out by foreign citizens. That means that, for the purchase of a one million euro home, the buyer paid the ment 110,000 euros in tax.

Last year's results have been much better than anticipated and the Government received 55% more than forecast in its Budget.

With the crisis caused by COVID-19, the Government estimated tax revenue at 764 million euros, the reality has been much better and total tax revnue is 1,185 million euros. The figure has surprised the Government because it is 340 million more than what was collected in 2020 and, in fact, the final income was higher than was predicted for this year.

Forecasts for 2022

If the previous year’s perfomance is mainted or even improved in 2022 with the economic recovery, the final figures may be record-breaking. The Government's revenue forecast will fall short despite the complaints of the opposition, which when in office assured that the revenue calculation in the 2022 Budget was inflated.

Despite repeated requests from the PP to approve a tax cut, the Government insists that neither the wealth tax, as requested by the opposition, nor the inheritance tax, which is paid when an inheritance is obtained, will disappear. In fact, in this year's Budget Law there is even a small tax increase for the richest: property purchases worth more than one million euros will pay 11.5% tax instead of paying 11% as at present.

However, those who buy a house to use as their habitual residence will pay 5% tax even if it is not the first one they buy, although they will have to prove that they do not own another home.