The taxes at each stage
| Stage | Tax | Paid to |
|---|---|---|
| Purchase (resale) | Transfer tax (ITP), progressive Balearic scale | Balearic tax agency |
| Purchase (new build) | VAT and stamp duty (AJD) | State and Balearic tax agency |
| Ownership | IBI, waste collection tax | Town hall |
| Ownership | Imputed income (non-residents) or none on main home (residents) | State tax agency |
| Rental | Income tax on rent; tourist tax on holiday lets | State; Balearic government |
| Sale | Capital gains tax; plusvalía municipal | State; town hall |
Buying
Resale property in the Balearics pays transfer tax on a progressive scale that rises with the price; new builds pay VAT and stamp duty instead. Some buyers qualify for reduced rates. See transfer tax in the Balearics and VAT on new builds.
Owning
Every owner pays IBI, the municipal property tax based on the cadastral value. Non-residents also pay income tax on an imputed income each year. See IBI and imputed income.
Renting
Rental income is taxed differently for residents and non-residents, and holiday rentals add the tourist tax collected from guests. See holiday rental taxes and rental income for non-residents.
Selling
The gain on a sale is taxed as savings income for residents and at 19% for non-residents, and the town hall charges the plusvalía on the increase in land value. See capital gains tax and plusvalía.
An illustrative example
Based on situations we commonly see; not a specific client. A buyer of a resale villa in Santa Eulària asked us to estimate all taxes for the first five years: transfer tax, IBI, non-resident imputed income, the tax on summer rentals and the future capital gain. The figures helped the buyer decide to hold the villa jointly with a spouse to reduce wealth tax.
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.
Not sure what you owe? Ask before the deadline
Send us your situation or the letter you received. A tax adviser will tell you what applies, what it could cost and what to file.
Questions about property taxes in Spain
Which taxes do I pay when buying in Mallorca?
Transfer tax on resale property or VAT and stamp duty on new builds, plus notary and registry fees.
Who pays the plusvalía?
Normally the seller, unless the contract says otherwise.
Do I pay tax on my holiday home every year?
Yes: IBI to the town hall and, as a non-resident, income tax on imputed income.
Can you handle all my property taxes?
Yes, from purchase to sale, for residents and non-residents.