Summary of the correct way to tax for single-family homes with valid or provisional license registered in the Ministry of Tourism of the Balearic Government.

First, we must consider that the rent and sale of housing is in principle exempt from VAT. However, section “e'” of article 20.1.23ºb of the LIVA establishes that this exemption will not be effective in the case of leases of apartments or furnished homes when the lessor is obliged to provide any of the complementary services of the hotel industry, such as restaurant, cleaning, laundry or other similar. In these cases, the person who gives the house to the user has the obligation to issue VAT invoice, even if only one is the service provided.

The aspects to consider are the following:

• -You must make the quarterly VAT declaration at 10%.
• – You can deduct all direct expenses of the property such as: IBI, garbage, supplies, insurance, community expenses and real estate commission
• -You must invoice the final customer with an IVA of 10%.
• -The real estate or intermediary company charges its commission plus 21% VAT.
• -The owner must not make model 130.
• -The owner must declare the annual benefit in the section: Real estate capital yields of his annual income
  – It is not necessary to register in finance under the heading: Leases of business premises.

At Ripoll & Mateu Solicitors Mallorca we advise, defend and represent our clients at all levels. Our greatest asset is an infrastructure of professional leaders in each field of action, especially Real Estate and Tax and Tourism Law   as well as our international vocation and multilingual capacity.

Our team is committed to providing the best work processes to provide our customers with the best results, in a constant quest for professional excellence. We establish external collaboration when circumstances require and are firmly committed to transparency and honesty in our actions.

The Supreme Court of Justice of the European Union (CJEU) sentenced last December the Spanish banks to pay back all the money overcharged for the floor clauses, eliminating the non-retroactivity set by the Supreme Court (TS) in May 2013 and which limited the refund of what was charged in excess as of that same date. This ruling considers that limiting retroactivity is contrary to Community law, which in practice has meant recognizing the total retroactivity since the signing of the loan.

In recent days, the Government of Spain has decided to postpone a further week the royal decree law that articulates an extrajudicial system to return the money improperly collected by non-transparent floor clauses. This fact supposes to postpone the publication of the new mortgage law. In December, the Government has already decided to postpone the approval of a code of good practices to facilitate the return of the overcharged by the floor clauses.

How can we know if we are affected by the floor clause

– The first thing we must do is to search and carefully read the deed of our mortgage. It is usually recognized under headings with headings such as “limits on the application of variable interest”, “limit of variability” or “variable interest rate”. It is very important to also pay attention to the historical evolution of the mortgage rate. If since 2009 you haven’t noticed a noticeable decrease in your mortgage payment or it has remained fixed, it is very likely that it has a floor clause.

– It is very important that the ground clause is null. What the CJEU says is that if a Spanish court declares it null and void, it must be returned from the beginning and not from May 2013, as ruled by the TS court. Therefore, you must get a court to issue a judgment in your favor in order to claim the amounts.

– If you came to an agreement with the bank to remove the floor clause from your mortgages and resigned to take legal action in the future to claim more money you should know that some courts have also begun to declare these types of agreements null and void.

The extrajudicial system seeks to facilitate an agreement with the entities and establishes a maximum term of three months for their return. This procedure will be mandatory for the entity, but voluntary for consumers.

Thus, banks do not have the material means or “enough people” to process the repayment of amounts collected by non-transparent land clauses on mortgages in three months. The decree contemplates that clients can recover in cash the overcharged interest on the non-transparent floor clauses in their mortgages or opt to amortize the outstanding capital of the loan if they have not yet finished paying it.

What steps you have to take to complain

• You have to try to negotiate with the bank in order to reach an agreement, if the bank does not eliminate the floor clause, the only option is to file a lawsuit.
• You can claim the elimination of the floor clause before the Bank of Spain whose report, however, is not binding. The last option is the complaint.
• In some cases, you can claim even if you have already finished paying the mortgage. That is, it is not always necessary that the debt with the bank be alive. Of course, it will be necessary to check in each case if the debt is four or fifteen years.

Get advice from an expert lawyer

Once you have identified yourself as harmed by the floor clause and to prevent the bank from re-taking advantage of the client, the most important thing is to have expert legal advice, which also examines any type of agreement with the bank and conscientiously analyze the feasibility of the claim.

At Ripoll & Mateu Solicitors Mallorca we advise, defend and represent our clients at all levels. Our greatest asset is an infrastructure of professional leaders in each field of action, as well as our international vocation and multilingual capacity.

Balearics is the Spanish community in which has more increased the price of housing compared to 2015, an increase of almost 10% when the rest of communities the increase does not reach 2.5%. In the whole of Spain, the average price of private housing increased by 2.4% in the first quarter to stand at 1492.4 euros per square meter, stringing four consecutive quarters with annual growth, as reflected in the statistics recently published by the Ministry of Public Works.

The price of private housing has also increased by 0.2% per square meter in reference to the last quarter of 2015. Since the minimum value reached in the third quarter of 2014 the price of housing has rebounded 2.5%. This new increase comes after the average price of private housing to go up 2.1% last year. It has experienced in the first quarter year on year growth of 3.1% after adding six consecutive quarters of increases.   In the classification by autonomous communities that present year growth of price, are the Balearic Islands (9.6%); Catalonia (4.9%); Madrid (4,2%); Extremadura (3.7%); Galicia (2.6%); Valencia (2.4%) and Canarias (2.4%). Free housing for up to five years old has increased in the first quarter by 0.2% to 1,727.8 euros, while those of more than five years have grown 1486.4 euros per square meter, representing a rise 2.6% annual rate. On the other hand, the average price of subsidized housing registered an increase of 1.5% to 1,113.2 euros / m2. The number of property valuations used for the calculation of housing prices in the first quarter of 2016 was 110,133, representing a 13.9% increase over the same quarter last year.

If you intend to purchase a property in Majorca from a foreign country, Ripoll & Mateu Solicitors Mallorca can fully assist you in the buying process. We offer our clients a comprehensive service in everything required for the purchase of a property. Feel free to contact us, we specialise in Real Estate Law and legal and tax advice in the process of buying and selling a property in Mallorca.

Groups that are part of the Parliament of the Balearic Islands have supported past week the initiative of Partido Popular concerning the rental accommodation in the Islands, this is based on three aspects:

• The Parliament urges the Balearic Islands Government to submit this initiative to the camera for study, discussion and adoption of a draft law regulating the different types of tourist stay in the Balearic Islands.
• The Parliament urges the Government to reach a consensus on this bill with all sectors concerned and especially with marketing holiday rentals online companies.
• The third point concerning the removal of the bill tax tourist stays in the Balearic Islands and measures to promote sustainable tourism to the regulation of rental holiday housing, finally it has not been tested for lack of consensus among the different parties.
  The parties supporting executive management have refused to do so, because the intention is that the new tax begins to be charged this year.

Over the past year, the regularization of holiday homes was lower than the previous year due to the rise of this activity outside the current rules. That is why has intensified inspections in such housing. The owners who want to rent their homes to tourists should make a statement accountable to the Ministry of Tourism, as recorded by the Tourism Act of 2012.

If you have a property in Mallorca and you want to rent it during holiday periods please contact Ripoll & Mateu Solicitors Mallorca, we will advise and accompany you during the process of legalizing your home for holiday rental and will offer you updates and standards about this.