Taxes and Additional Purchase Costs when Buying a Property in Mallorca

The purchase of a second-hand property is subject to real estate transfer tax (ITP). The real estate transfer tax rate for the Balearic Islands (Mallorca, Ibiza, Formentera, Menorca) is staggered:

• For the first part of the purchase price up to 400.000€: 8%
• For the part of the purchase price between 400.001€ and €600.000€: 9%
• For the part of the purchase price between 600.001€ and 1.000.000€: 10%
• For the portion of the purchase price from 1.000.001€ to 2.000.000€: 12%
• For the part of the purchase price from €2.000.001€: 13%

Additional costs: In addition to the land transfer tax, there are other costs such as notary fees and registration fees in the land register. 

Individual advice: The exact amount of tax may vary depending on the individual situation. It is therefore advisable to consult a tax advisor.

Example:

If you want to buy a property for 500.000€, you would pay the following tax:
On the first 400.000€: 8% = 32.000 €
On the next 100.000€ (from 400.001€ to 500.000€): 9% = 9.000€
Total tax: 32.000€ + 9.000€ = 41.000€

The tax must be paid within 30 days of the transfer of ownership.

Primary residence: For the purchase of a primary residence property up to €270,151.20, a reduced tax rate of 4% applies for residents in Spain.

Please note: Tax laws are subject to change. For up-to-date information, we recommend that you always consult an official source or a tax advisor.

While the purchase of a second-hand property is subject to real estate transfer tax (ITP), value added tax (IVA) is payable on the purchase of a property for first-time occupation (new-build property). The applicable tax rate depends on the type of property: For residential properties including garage parking spaces (max. 2 per residential unit), 10% IVA is payable on the purchase price.

For the purchase of land from a commercial enterprise and the purchase of commercial property, the tax rate is 21%.

Land transfer tax and VAT are never payable together; either one or the other is paid. 

For property purchases that are subject to VAT, stamp duty is also payable (tax on notarised legal transactions).

On the Balearic Islands, the stamp duty (AJD) has been in force since 01 January 2023:

Stamp Duty (AJD):

• 1.5% of the purchase price (for property purchases).
• 2 % for a purchase price over € 1,000,000.

Payment deadline:
Within one month of notarisation.

Mortgages:
Since 2018, the lender pays the tax.

Property register:
Payment of stamp duty is a prerequisite for registration.

The notary public's fees are generally paid by the Purchaser and calculated in relation to the fixed purchase price. As a rule, the notary's fees are max. 0.5% of the purchase amount.

The costs associated with the registration of the property in the land register are also almost always paid by the buyer and are calculated in relation to the purchase price set out in the purchase agreement. This amount can also be put at a maximum of 0.5% of the purchase price, but in most cases, it is significantly less than this amount.

The profit from the sale of a property owned by a non-resident must be taxed. This profit from the sale of real estate is calculated as the difference between the purchase price (plus additional purchasing costs at that time such as taxes, modernisation and renovation costs, depreciation, brokerage costs and the proceeds of the sale. A 19% tax is payable on the profit thus calculated. In Spain, there is no speculation period, so the profit is always taxed at the same rate of 19%, regardless of whether the purchase was made 5, 10 or 20 years ago.

In Spain, there is a special rule concerning the income tax payable by the seller on the profit made on the sale. The buyer retains 3% of the notarised purchasing price and must pay this to the tax office within one month as an a-conto payment on the seller's profit tax. In this way, the Spanish tax authorities secure a part of the expected profit tax. The non-resident seller must file a tax return for the property sale within 4 months of the sale, in which he or she can then deduct the 3% as a payment already made on the final tax liability.

In addition to the profit tax, the seller has to pay the so-called value-added tax (plusvalia municipal), which is levied by the local authorities. It taxes the (fictitious) increase in value of land and property since the last notarisation. To calculate it, one needs the cadastral value of the land, the duration of ownership and the calculation factor of the respective municipality. Plusvalia's tax liability is payable to the tax office within 30 days.

Property Tax

Land tax (IBI) is levied on the value of rural and urban land on the basis of the cadastral value by the competent municipality and is payable annually. The level of the land tax is set by the municipalities and varies throughout Spain between 0.4% and 1.1% for developed land and between 0.3% and 0.9% for undeveloped land. In the Balearic Islands, the property tax is multiplied by the cadastral value by means of a certain factor and is related to the development. The exact values are available from the municipal administration on request.

Vermögensteuer für Nichtresidenten

Die Vermögenssteuer ist hinsichtlich ihrer Höhe progressiv und beträgt zwischen aktuell zwischen 0,28 bis 3,45 % des Nettovermögens. Auf den Balearengilt gilt seit 2024 die neue Vermögenssteuerregelung für Nichtresidenten. Wichtigste Neuigkeit ist die Erhöhung des Freibetrags von bisher 700.000 auf nun 3.000.000 € pro im Grundbuch eingetragenen Eigentümer. Bei Berücksichtigung der nun geltenden Freibeträge und eventuelle Belastungen der Immobilie mit Hypotheken, ist für die meisten Eigentümer diese Steuer nicht mehr relevant.

Income Tax

Income Tax (IRPF) for Personal Use of the Property

The Spanish tax authorities tax a non-resident who only uses the property for holiday purposes on the benefit of self-use as fictitious rental income. The tax is 19% to 1.1% of the cadastral value.

Income Tax on Rentals

If the property is let to a non-resident, an income tax of 19% on the rental income is payable for this period. However, various costs are deductible, e.g. interest on mortgage loans, community costs, property tax, maintenance costs, insurance, and depreciation = 3 % p.a. on the value of the buildings. 

We generally recommend that you seek advice from a tax consultant or specialist lawyer regarding the tax aspects of buying a property in Mallorca.