The following information pack has been compiled for the clients of MALLORCA CONNECT who are considering moving to and purchasing a business on Mallorca. Every client who purchases a business through MALLORCA CONNECT will be assisted with all of the services referred to within as part of our service. The information contained within this guide has been verified as being accurate, true and genuine by an Abogado (The Spanish equivalent to a Solicitor) who is a member of the Balearic College of Lawyers, the name of whom is available upon request. At MALLORCA CONNECT we are proud to guarantee that we adhere strictly to the contents of this guide, on each and every transaction in which we become involved, our help will be invaluable.
We believe in a completely honest and no-nonsense approach in all of our business dealings. Therefore all descriptions of businesses in our listings are honest, accurate and properly reflect the business in question, we will not disappoint you upon your visit to the island. All the asking prices in our listings are shown in £’s Sterling as most of our clients are from the U.K., we illustrate the Sterling Pound equivalent for every asking price listed but of course this can vary depending on the Exchange rate on the day. As with any commercial practice all prices are negotiable, some more than others, and we will be pleased to advise on every aspect of all business transactions, from viewing to completion, as we have vast legal, accounting and negotiating experience and want you to succeed in purchasing the business of your dreams.
We have extensive experience in business sales both in the U.K. and on Mallorca. Every year we hear of people who are persuaded to purchase a back-street “starter” bar and are told that the business is a “gold mine”. Always remember that, location, location & location are the three golden rules with any business purchase and that businesses listed by other agents at unbelievably low prices are usually “bargains” because no-one else will buy them. Many people have purchased these so-called bargains only to fail and be forced to move back to England with little or no money left.
We will therefore only list businesses that are either established, or have great potential and above all are located in a great position and in our opinion will succeed with new owners who are prepared to work hard, albeit with our guidance.
Once you have decided that you would like to come to Mallorca for an inspection trip you should contact us to let us know the dates you have in mind. We can offer practicable cost saving advice on flights, accommodation and car hire, and can in fact organise these for you to save you time and trouble. Of course it is always worth checking with local travel agents as sometimes last minute package deals can be of tremendous value. If you wish we can meet you at the airport to collect you and to take you to the accommodation of your choice and of course we will collect you from your hotel and return you to the airport in plenty of time for your return flight.
Upon arrival, an appointment can be made to meet and discuss all the details of a possible move to Mallorca, i.e. businesses, accommodation, schools, etc, etc. If any of the businesses appear to be of interest to you then we will arrange convenient viewing whilst you enjoy your stay on the island. Any such viewing will be accompanied by us, and any information that you require can be discussed with the owners of the business. You will not be put under any pressure to purchase a business whilst on the island, as we believe that a cooling off period is advisable when making a decision of such importance.
If you have already booked an inspection trip with another estate agent it is always worth making a telephone call to our office, either before or during your visit, to arrange a no obligations meeting whilst you are on the island. We have many businesses on our books that do not appear with other agents and therefore it is sensible to meet and discuss your requirements. We have extensive contacts on the island and have many associates with whom we work on a regular basis.
When you have decided on the business of your choice an offer should be made through MALLORCA CONNECT which will be relayed to the vendor. This can be done either on your visit, on any subsequent visit, or indeed when you are back in the UK. Once negotiations have been concluded and terms, conditions and a price agreed we would accompany you to meet with an English speaking Abogado (the Spanish equivalent to a Solicitor) where the terms and conditions of the purchase will be discussed. The Abogado will ensure that the business is totally legal, i.e.- that the lease and its terms are valid and that the business has an opening licence and is debt free, and that a complete inventory has been taken of the assets of the business which accurately reflects what you have been shown and what has been agreed.
Every business in Spain must have two licenses to be fully legal, firstly a valid Opening Licence must issued from the local town hall for the correct activity of the business, secondly, there must be a permission from the Government tourist office for the business to trade legally. Without these licenses the business is illegal and you can be fined, sometimes heavily, and the business can be closed down by the police. Therefore, it is imperative that before you part with any money that you or your Abogado ensures that these licenses exist and that they are valid and up to date. We are happy for our clients to use the services of any Abogado which they chose, we have nothing to hide, however, we will always recommend one firm of Abogados with whom we work on a regular basis. The firm in question all speak perfect English, and are one of only three firms of Abogados on the island that are recommended by the British Embassy in Palma de Mallorca.
Then and only then will an Option to Purchase Agreement be drawn up at which stage a deposit is paid which is usually 10% of the agreed purchase price. This deposit payment is held in a client account, usually by the Agency, who then becomes the legal guardian of your deposit money. This deposit will be held on your behalf and on behalf of the vendor and, is only paid to the vendor upon the successful completion of the sale as per the terms of the Option to Purchase Contract. Once the Option to Purchase Agreement has been signed and the deposit paid the business is taken off the market. The Abogado will have already discussed a completion date for the purchase with you and will ensure that the new lease and all other licenses and documentation are ready for the day of completion. This is when the balance of the purchase price should be made to the Abogado on behalf of the vendor.
In the meantime we will introduce you to an English speaking Gestor (the Spanish equivalent to an Accountant) who will assist you with all the necessary documentation connected with the purchase of the business and your move to Mallorca. This will include making applications on your behalf for the following legal requirements:-
NIE NUMBER -This is a personal identification number and is issued to all residents of Spain. It is vital that you have applied for this number, as you cannot trade your business legally without it.
FISCAL LICENCE & SOCIAL SECURITY REGISTRATION - A licence which relates to any taxable activity for your business. Once applied for, both you and your family are entered into the Spanish equivalent of the social security system and are therefore entitled to healthcare and pension rights.
OPENING LICENCE - Every business premises must have this licence from the local authority giving it permission to trade. The Gestor will ensure that the current licence for the business premises is transferred.
IAE TAX OFFICE REGISTRATION - Every kind of business, trade or profession has a category and a yearly fee is payable as well as income tax, which is usually paid on account every quarter.
IVA REGISTRATION - Spanish equivalent to VAT registration. There is no threshold for registration as in the UK but the rate is lower.
APPLICATION FOR RESIDENCY - Although the residency can take up to a year to process once applied for you are totally legal to live on Mallorca and to own and run a business.
APPLICATION FOR NATIONAL HEALTH SERVICE - Allows you and your family to visit an appointed doctor similar to the UK.
MEDICAL CERTIFICATE - A brief medical to ensure that you are good health.
CONSULAR INSCRIPTION CERTIFICATE - All British residents are advised to register with the British Consulate if they are to stay in Spain on a permanent basis.
FOOD HANDLERS LICENCE - Anybody involved in the handling or preparation of food must undertake a simple examination and seminar. The proceedings are in Spanish and therefore unless you are already fluent you must have an interpreter to assist you, we can arrange this service.
Although all of the above applications appear to be complicated and extremely daunting, your Gestor will handle all of the paperwork for you. All you have to do once you have had initial contact with your Gestor is to take all your paperwork to him on a quarterly basis, sign occasional documents, and he will take care of everything else, leaving you free to devote your time to running your business and enjoying life on Mallorca.
As is common in the UK both freehold and leasehold business premises are available. However, most are leasehold and leases can vary in duration from five year to lifetime. Increasingly becoming most popular are five year renewable leases, which means that the Landlord has to offer you a subsequent term at no extra charge other than it will enable him to increase the rent by the cost of living (see below). It is therefore essential that a renewable clause is contained within your lease and your Abogado will ensure that this is the case.
When you are offered details of a business with an assignable lease the current rental will generally be listed. It is normal for the lease to allow the Landlord to increase the rental upon transfer; sometimes by up to 15% of the current rental, again your Abogado will advise you and will negotiate on your behalf with the Landlord. Once the future rental has been agreed this can only increase annually in line with the cost of living (set by the Spanish Governments Statistical Bureau) and is currently around 2% per annum.
The Abogado will ensure that the Lease enables you the right to sell-on the premises at a later date along with all the fixtures, fittings and equipment of the business. The Landlord has the right to retain a proportion of any monies received for the lease of the business upon transfer, usually around 15%, but again this must be contained within the terms of the lease and again your Abogado will advise you. For leasehold business’s it is normal for the purchaser to pay the Landlord a deposit bond, which is equivalent to two months rent in addition to one month’s rent in advance.
Freehold properties are always harder to find and of course more expensive than leasehold. Freehold properties are much the same as in England and can be mortgaged with most of the Spanish banks. Expect to be able to borrow 50-60% of valuation for business premises, and around 80% of valuation on residential properties. Also bear in mind that various taxes apply when purchasing a freehold property and you can allow approximately 8% of the declared purchase price to be payable in taxes.
The south-west of the island has the largest foreign-based population. What makes this area so popular is the longer season that it enjoys over and above all other parts of the island, and with close proximity to the city and the airport. The city of Palma de Mallorca is the capitol of the entire Balearic Islands with a population of over 300,000 people. The city is always worth a visit but to run a business in Palma is extremely difficult for British owners unless they can speak reasonable Spanish or can align themselves to the busy yachting community on the island, probably the largest in the entire med. From Palma the first resort is Cala Major which merges into San Augustin making one large area. The resort is busy all year round as many British residents live here permanently. There are also several hotels and holiday apartment buildings and British owners can make a reasonable living here both summer and winter.
Illetas is an up-market resort, which juts out into the Bay of Palma, Illetas, has several hotels, all of which has either a 4 or 5 star rating. There are many apartment blocks, many of which are lived in all year round. Portals Nous has very much a village feeling with many British and German residents, lots of shops, restaurants and several hotels. Lying below the village of Portals Nous is the famous yacht marina of Puerto Portals, see here million pound yachts, designer boutiques and many up-market restaurants and bars, a place to definitely watch the world go by.
Next along the coastline are the well-known resorts of Palma Nova and Magaluf, the main destination on the island of many British holidaymakers. Palma Nova tends to be more family orientated with three large sandy beaches and many hotels, restaurants and bars. Magaluf by contrast is lively, bustling and at times noisy with many discos, bars and restaurants. Very much a place for the younger set, a night out in Magaluf is a must for the pleasure seekers. Further down the coast is the beautiful resort of Santa Ponsa which is built in a horseshoe shape around a large bay. Again, Santa Ponsa is more family orientated with a beautiful, large sandy beach with lots of hotels, apartment blocks, bars and restaurants. British business owners can thrive in these three resorts, as they are the mainstays of the British holidaymakers who come to Mallorca year after year, as well as many British residents who make this are their permanent home.
Finally, along the south-west coastline are the resorts of Paguera and Puerto Andraixt, both very beautiful and busy. Paguera is a predominately German resort and in our opinion extremely hard for a British business owner to mix in with the German market. The resort has a large sandy beach with many restaurants and bars for the mass market, whereas Andraixt is very up-market with some fantastic restaurants and bars. Another place to sit and watch the world go by.
To the east of the city of Palma lie the huge resorts of Ca´n Pastilla and Arenal which are collectively known as Playa de Palma. With a beach that is approximately 5 miles long there are hotels, restaurants, bars and discotheques in abundance. These resorts are predominately German and again extremely hard for British owners to make the cross over. Also, we find that in Ca’n Pastilla there are approximately 12 – 15 British owned bars all located in side streets which never seem to attract passing crowds. These businesses are usually small and cheap to purchase, but they change hands every year due to the fact that none of them ever make money.
In the north of the island are the resorts of Alcudia,
Ca’n Picafort and Puerto Pollensa, all three resorts are well
established with Alcudia suiting the more family oriented holidaymaker
and Pollensa the more up-market older age group. We would always recommend
these resorts for British business owners as they seem to attract British
holidaymakers year after year, and although you will generally only
have a shorter season, the season will be good allowing you a long winter
break.
On the east coast of Mallorca there are many new resorts that very busy
in the summer months but much quieter in the winter. The resorts that
are the principal areas are from the north downwards, Cala Bona which
merges into Cala Millor and then SÍllott, Sa Coma, Porto Cristo,
Cales de Mallorca, Porto Colom and Cala D ´Or. All have many hotels,
bars and restaurants, sandy beaches, coves and many places of interest.
The principal British resorts on the East Coast are Cala Bona, Cales
de Mallorca and Cala D´Or with a strong British market year after
year. We believe that Cala D’Or is the strongest of the East Coast
British markets owing to its beautiful location and brilliant facilities.
Built in an Ibizan style with every property being whitewashed and nothing
being built above four stories makes the resort both beautiful to look
at and popular with tourists. There are several sandy beached in Cala
D ´Or, many shops, bars and restaurants, and a multi million pound
yacht marina which is always worth a visit to watch the world go by.
The Spanish banking system is similar to England in many respects; in fact there are branches of Barclays, Nat-West and Lloyds on the island. Most Spanish banks have an English-speaking member of staff especially in the resorts so banking represents no huge difficulties. It is usual for people moving to Mallorca to open a foreign residents account at a bank in Mallorca so funds can be transferred from the UK, again this is a service we can assist you with. This process is relatively in-expensive and only takes a few days to complete. Once your business purchase is complete then a business account can be opened along with personal current or savings accounts. Electricity and Telephone bills can be paid directly from the account by standing order along with other services i.e. Insurance etc.
It is usual for purchasers to be made in cash as most businesses are Leasehold and therefore hold no real security as far as lenders are concerned. Private agreements can sometimes be made where a proportion of the agreed purchase price is either deferred or paid by installments. Any arrangement would have to be drafted by an Abogado and although possible would be dependent upon the goodwill of the owner.
Finance is available on freehold properties but only on the bricks and mortar as in England. Current interest rates in Spain are very low and loans up to 75% of value are readily available. Many people moving to Spain from the UK chose to retain their home in England and if there is equity available it is always possible to release some of that equity to fund a purchase in Spain.
We would advise that it is best to rent accommodation initially until you find a part of the island where you wish to settle on a permanent basis. We have many contacts for rented apartments and villa’s and will assist you in finding accommodation, which suits your needs. Prices can vary depending on the time of the year but expect to pay from £250-£450 per month for a two/three bedroom, two bathroom apartment in a good location. Most apartments are in complexes with swimming pools and gardens and whilst most are furnished, unfurnished are readily available. Again it is usual for a deposit equivalent to two months rent to be paid with a months rent in advance, in addition if you use an agency to find your accommodation they will usually charge a months rent as their commission.
In line with European monetary union Spain introduced the Euro on 1 January 2002. The first six months have gone extremely well, albeit with a lot of rounding up of prices, and both the locals and tourist have adapted well to the change.
There is limited piped gas in the Baleares and gas mostly comes in butane bottles similar to Calor Gas bottles in the UK. These cost around £5.00 and can be exchanged at one of many depots or indeed can be delivered to your door.
Electricity is paid for every two months and is relatively in-expensive compared to the UK.
Telephone installation will cost around £60 to be connected and the connection service is extremely fast. Mobile telephones are very popular in Mallorca and can be purchased very cheaply and it is easy to convert all the languages and announcements into English.
All types of insurance’s are available in Mallorca - i.e. home contents, motoring (including English plated vehicles) and medical insurance. We can recommend a Qualified English Insurance broker based in Mallorca for all your insurance needs.
As previously stated it is possible to find unfurnished accommodation on the Island should you wish to bring your home contents with you. We can recommend a removal company who can organise everything for you, from packing to shipping to storage and finally to delivery to your door for part or full loads. You should allow approximately £100 - £120 per cubic meter from door to door for deliveries from the U.K. to Mallorca.
English is widely spoken and understood in Mallorca especially in the popular resorts. Most professionals and suppliers speak English but you will soon pick-up the basics of the language. Should you wish to become fluent in Spanish, which is advantageous but not essential, then there are many language schools around and indeed Calvia Council runs a free language course if you live within the municipality of Calvia.
It is possible to bring a right hand drive car to Mallorca and it can be used for a short time without the need to register the car with the authorities. However, if you are able to sell your car before you move it would be advantageous as visibility is impaired at certain times - i.e. roundabouts, overtaking and there is a charge to register a right hand drive car for PM plates. It is also possible to insure an English plated car in Mallorca and Insurance generally works out slightly cheaper than in the UK.
Left-hand drive cars are advisable and once you have made the various applications to buy your business you are able to purchase one. However only buy from a reputable dealer as cars can have problems with past debts, which a new owner could find himself responsible for. New cars are much cheaper than in the UK as are second hand cars, and taking into account the mileage and age of the vehicle a second hand car represents extremely good value.
Petrol is lower in price than in the UK and diesel considerably so, a road fund licence is about £60 per annum for a small family saloon and the Spanish equivalent to the MOT is only required when the car is over four years old and is then only required every two years.
Once you have applied for the various licenses required for your business and began paying into the Social Security system both you and your family are covered for medical care and attention. The Spanish health service is acknowledged as good but perhaps a little more basic than in the UK, however, private medical insurance is available for treatment in either Spain or back in the UK at very competitive costs.
The Spanish education system is acknowledged as very good and is non-fee paying with the exception of exercise books. However, all lessons are in Spanish and a basic knowledge of Spanish is advantageous. Small children seem to adapt very quickly and soak up their new language in a short space of time. Most schools in the popular resorts have a number of English children in each class and Spanish lessons are generally available.
Mallorca has several International schools where the entire syllabus is in English and in fact they follow the same pattern of GCSE’s and A level’s as in England. This enables children to apply for universities in either the UK or in the USA. These schools have an excellent reputation but are fee paying as with a private school in the UK, however most international schools will allow fee payments to be spread over the school year.
Balearic International School http://www.balearesint.net
+34 971 401812
Queens International School http://www.ocea.es/queens
+34 971 401011
Richard III International School http://www.kr3c.com
+34 971 675850
The Academy International School
http://www.theacademyschool.com +34 971 605008
Bellver International School http://www.bellver.baleares.net
+34 971 401679
There are no quarantine regulations as in the UK but you must have a certificate from the Ministry of Agriculture, Fisheries and Food which must be endorsed by your local Vet that the animal in question has all the necessary vaccines. You will also have to check which airlines will allow you to take your pet on board with you.
All UK electrical goods work in Spain with the exception of TV sets, which have to be converted at a small cost. You can either use adapters or indeed can change the plugs to the two pin Spanish type.
Taxation is recognized as being higher in Spain than in the UK but the authorities seem to be extremely trusting with the black economy and appear to be content if every business pays a little tax. However, this may change with the influence of the single European market.
We would advise that you retain the use of the Gestor
who initially applied for all the various licenses and legal requirements
for you, as to complete your quarterly IVA (VAT) & TAX returns.
The system is complex and changes all the time so it is best left in
the hands of a professional which will also leave you
free to devote more time to your business. The level of IVA (VAT) in
Spain is lower than in the UK but there is no threshold for the level
of turnover at which registration must take place, therefore every business
has to declare quarterly returns.
Income tax is paid quarterly on account with a balancing payment/ re-payment on an annual basis. We believe that this is a far better system than in the UK where tax is paid in arrears and often at a time when the cash flow of the business means that no funds are available.
There is also a system, which can apply to most businesses, which allows the business to pay one quarterly payment for IVA and TAX at a rate set by the authorities regardless of turnover. This system is very simple and you do not have to keep books or records. However your Gestor will advise you which is the best system for your kind of business.
In addition to the purchase price of your business there will be additional costs involved in setting up the business and in your move to Mallorca. You should certainly budget for these costs as many business failures are due to being initially under-capitalised or suffering from a lack of working capital. Typical costs are as follows:
Legal Fees/Licenses etc Approx. £ 600
Removal costs - Full load Approx. £2,400
Removal costs - Part load Approx. £ 800
3 months rental on business Approx. £1,200
3 months rental on apartment + agency commission Approx. £1,200
Single flights to Mallorca (say two adults + two children) Approx. £ 200