Where taxpayers get caught out
The tax agency compares the declared price with its reference value. If the price is lower, the tax is calculated on the higher value and the difference is claimed later with interest.
How the tax is calculated
| Element | Rule |
|---|---|
| Base | Price in the deed or the reference value, whichever is higher |
| Rates | Progressive Balearic scale, from 8% on the first band |
| Who pays | The buyer |
| Deadline | One month from signing the deed |
| Form | Balearic ITP return (modelo 600) |
The reference value
Since 2022 the Spanish Cadastre publishes a reference value for each property. If you pay less than that figure, the tax is calculated on the reference value. You can challenge it, but the burden of proof shifts to you. Checking it before signing avoids surprises.
Reduced rates
The Balearic Islands provide reduced rates for certain buyers of a main home, such as young people, large families or people with disabilities, subject to price and income limits. Most foreign buyers of second homes pay the general scale.
Other purchase costs
Notary, Land Registry, legal fees and, if you take a mortgage, related costs. Purchase costs increase your acquisition value for a future sale. See capital gains tax.
Buying from a non-resident
If the seller is non-resident, you must also withhold the 3% of the price. See the 3% retention, VAT on new builds and our property tax service.
An illustrative example
Based on situations we commonly see; not a specific client. A German buyer agreed to buy a flat in Maó below the Cadastre's reference value. We showed him the difference before signing, so he could budget the transfer tax on the reference value and avoid a later assessment with interest.
How Castell.tax can help
We handle the taxes of buying, owning, renting and selling property in Mallorca, Ibiza, Menorca and Formentera: purchase taxes, IBI and the cadastre, rental returns, plusvalía and capital gains. We coordinate with your lawyer and notary so the figures are right before you sign. See our property tax service or contact us in English or German.
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.
Frequently asked questions
Who pays transfer tax?
The buyer.
Is ITP the same for residents and non-residents?
Yes, the rate does not depend on residence.
Do new builds pay ITP?
No, new builds pay VAT and stamp duty instead.
What if I paid less than the reference value?
The tax is calculated on the reference value unless you prove otherwise.