Types of tax when buying real estate in Mallorca

The first clarification of tax issues in connection with a property in Mallorca concerns the distinction between whether you are acting as a legal entity, e.g. on behalf of a company, or as a natural person. In addition, it is decisive whether you are registered as a resident in Spain or not.

One-off taxes:

• Property transfer tax: From 01.01.2023, new regulations for property transfer tax will apply in Mallorca. The first €400,000 of the property purchase price is subject to a property transfer tax of 8%. For the amount from €400,001 to €600,000 of the purchase price, a real estate transfer tax of 9% will be charged. Between €600,001 and €1,000,000 of the purchase price, the real estate transfer tax is 10%. Between €1,000,001 and €2,000,000 of the purchase price, the land transfer tax is 12%. If the purchase price exceeds €2,000,001, a real estate transfer tax of 13% is payable.
• VAT: Real estate transfer tax is payable on the purchase of a second-hand property and value added tax (IVA) on the purchase of a property for first occupation. The applicable tax rate depends on the type of property. For residential properties including garage spaces (maximum 2 per residential unit), the IVA rate is 10% of the purchase price. For the purchase of land from a commercial business and the purchase of commercial property, the tax rate is 21%.

Current taxes payable annually:

• Property tax (IBI): The property tax liability extends to the owner, leaseholder and usufructuary of the property. The municipalities determine the amount of property tax, which ranges between 0.4% and 1.1% for developed properties and between 0.3% and 0.9% for undeveloped properties throughout the country.
  
  
• Wealth tax: Wealth tax in Mallorca is a tax levied on a person's total assets. Both residents and non-residents must pay wealth tax in Spain. The amount of tax depends on the amount of assets held in Spain. Residents often have higher allowances than non-residents. Since 2024, these are currently EUR 3,000,000 per person. Wealth tax is usually due once a year and must be declared in the income tax return.
  
  
• Income tax (IRPF): In Spain, there are both regional and national income taxes payable by individuals and companies. For residents of Mallorca, special income tax rates apply depending on the amount of income. There are also various deductions and allowances that can be claimed individually. For non-residents who receive income from Spain, other tax rates and regulations generally apply. It is advisable to seek advice from a tax advisor to ensure that all tax obligations are met and possible benefits are utilized.
  
  
• If the seller of the property is a company, corporation tax of 25% or 30% must be paid on the profit made in addition to trade tax. However, if the owner is a natural person, the profit from the sale of the property is subject to income tax. Different tax rates apply for residents and non-residents. The profit is calculated from the difference between the original purchase price and the current sales price.

As you can see, there are a number of tax aspects to consider when buying a property in Mallorca. We therefore recommend that you address this issue as part of the purchase process and consult a tax advisor. If you need a recommendation, please get in touch with your contact person. This will provide you with comprehensive information on Spanish real estate and tax law.