Spanish income tax rates for residents in the Balearic Islands

The two scales

Type of income	Examples	Scale
General	Salary, pensions, rental income, self-employment	Progressive; the top combined rate in the Balearics is among the highest in Spain
Savings	Interest, dividends, capital gains on sales	From 19% rising by bands; see the savings guide

State and regional halves

The general scale is split into a State scale and a regional scale. The Balearic Islands have lowered rates for lower and middle incomes in recent years, while keeping high rates for the highest incomes. We calculate your tax with the scales in force for each year.

Allowances and deductions

• Personal and family allowances: taxpayer, children, older relatives, disability.
• Joint return option for married couples, useful when one spouse earns little.
• Pension plan contributions within legal limits.
• Balearic regional deductions, for example for rent of a main home, school costs or certain donations, subject to conditions.
• Credit for foreign tax paid on foreign income.

Pensions and foreign income

Foreign pensions, dividends and rents are all declared in Spain, with treaty credits where they were taxed abroad. See pension tax and savings income.

The alternative for new arrivals

People moving to Spain to work can ask for the Beckham regime instead. Everyone else files the annual income tax return, which we prepare.

An illustrative example

Based on situations we commonly see; not a specific client. A retired Irish couple in Sóller declared a pension each and some dividends. A joint return turned out worse than two individual ones; filing separately, with the treaty credit for Irish government pension tax, they paid noticeably less than their first estimate.

How Castell.tax can help

We prepare the annual income tax return of foreign residents in the Balearic Islands, including foreign pensions, investments, rental income and the foreign tax credit, and we compare joint and individual filing every year. We explain the result in English or German before filing. See our income tax return service or contact us to review your situation before the next campaign.

This page is published by Castell.tax, the tax practice of Castell.law in Palma de Mallorca. It is general information; tax rules and rates change, so check your case with us before filing.