The Complete Guide to Property Taxes and Purchase Costs for International Buyers

Property Transfer Tax (ITP) / Value Added Tax (VAT)

When buying a property on Mallorca, it is essential to understand the applicable taxes, as these can vary depending on the type of property. As a rule of thumb, budget an extra 11% to 15% of the purchase price for taxes, notary, Land Registry, and legal fees combined. At Balearic Properties, we simplify this process so you can focus on finding your dream home.

• New construction: VAT (IVA) at 10%, plus the Documented Legal Acts Tax (AJD) at 1.5% (2% over €1,000,000)
• Existing home (resale): Property Transfer Tax (ITP) at 8%–13%, tiered (see below)

New Construction and Fully Renovated Properties

If you are buying a new property, or one that has been completely renovated by a developer, you will pay Value Added Tax (VAT), known as IVA in Spain, at 10% of the purchase price, payable to the developer at completion. On top of the VAT, the Documented Legal Acts Tax (Actos Jurídicos Documentados, or AJD) applies to the notarial deed at a standard rate of 1.5%, rising to 2% for new-build properties priced at €1,000,000 or more.

Existing Homes

For second-hand properties bought from a private seller, you will pay Property Transfer Tax (ITP) instead, calculated on the tiered scale below. ITP and AJD are not charged on the same transaction, so buyers of resale properties do not pay the AJD percentage described above, only a small fixed notarial fee. The ITP must be settled within 30 working days of signing the deed.

Calculation of ITP for Existing Properties

For second-hand properties, ITP in the Balearic Islands is calculated on a tiered structure: each portion of the price is taxed at a different rate, as detailed below.

• Up to €400,000: 8%
• From €400,000 to €600,000: 9%
• From €600,000 to €1,000,000: 10%
• From €1,000,000 to €2,000,000: 12%
• Above €2,000,000: 13%

These percentages may seem complex, but the Balearic Properties team is here to guide you at every step, ensuring there are no surprises.

Example 1: Purchase Price of €650,000

• First €400,000 at 8% = €32,000
• Next €200,000 (€400,000 to €600,000) at 9% = €18,000
• Remaining €50,000 (€600,000 to €650,000) at 10% = €5,000
• Total Tax to Pay: €32,000 + €18,000 + €5,000 = €55,000

Example 2: Purchase Price of €2,500,000

• First €400,000 at 8% = €32,000
• Next €200,000 (€400,000 to €600,000) at 9% = €18,000
• Next €400,000 (€600,000 to €1,000,000) at 10% = €40,000
• Next €1,000,000 (€1,000,000 to €2,000,000) at 12% = €120,000
• Remaining €500,000 (above €2,000,000) at 13% = €65,000
• Total Tax to Pay: €32,000 + €18,000 + €40,000 + €120,000 + €65,000 = €275,000

By breaking down these examples, you can see exactly what you need to budget. At Balearic Properties, our goal is to make this process transparent so you can move forward with confidence.

Other Purchase Costs

Beyond the taxes above, every purchase in Spain involves a few fixed administrative costs. Notary fees are set by official tariff and typically run from €600 to €1,000 for the deed of sale, a cost driven by the complexity of the document rather than scaling directly with the property's full value. Land Registry fees for inscribing the property in your name typically add a further €400 to €650. These are separate from your lawyer's fees; our guide to what your lawyer handles during the purchase process covers that in detail.

Annual Property Taxes in Mallorca

Owning a property in Mallorca is a dream come true, and understanding annual taxes ensures there are no surprises. Below are the key annual taxes that apply:

• Real Estate Tax (IBI): This municipal tax is applied annually by the local town hall and is based on the cadastral value of the property.
• Garbage Collection Tax: This tax is collected by the local municipality to cover waste management services.
• Incineration Tax: In some areas, an additional tax is applied to cover the costs of waste incineration, often combined with the garbage collection tax.
• Non-Resident Income Tax: If you are not a Spanish resident, you must file an annual tax return for non-residents (tax form 210). This tax applies to potential rental income, but even if the property is not rented out, a theoretical income is assumed and taxed accordingly.
• Wealth Tax: Wealth tax applies to both residents and non-residents, though the scope differs. Non-residents are taxed only on assets held in Spain, while residents are taxed on their worldwide assets. The Balearic Islands apply a progressive scale from 0.28% to 3.45%, depending on the value of your assets, with the first €3,000,000 per person exempt. Residents get a further allowance of up to €300,000 for their primary residence. Only the value above these thresholds is taxed. Owners with particularly large net worths should also ask their tax advisor about the separate, national-level Temporary Solidarity Tax on Large Fortunes, which can interact with Wealth Tax depending on individual circumstances.

These annual costs are part of the privilege of owning a property in one of the most beautiful places in the world. Our team at Balearic Properties is here to help you navigate these responsibilities, ensuring your experience as a property owner is as smooth and enjoyable as possible.

It is highly recommended to consult with a tax specialist to fully understand your specific obligations and ensure compliance with all Spanish tax regulations. At Balearic Properties, we connect you with trusted professionals who can help optimise your tax planning and make owning a property in Mallorca as rewarding as possible.

Owning a home in Mallorca is not just a financial investment; it is an investment in a lifestyle that offers beauty, relaxation, and unforgettable experiences. Allow us to help you make this dream come true.

Frequently Asked Questions

Do I pay ITP and AJD on the same purchase?

No. ITP and the variable AJD rate are incompatible, you pay one or the other, never both on the same transaction. New-build purchases pay VAT plus AJD; resale purchases pay ITP only, plus a small fixed notarial fee rather than the percentage-based AJD.

What happens if these taxes are not paid on time?

A surcharge applies that grows with the delay: 1% plus an extra 1% for each full month overdue if you are within 12 months, or a flat 15% plus late-payment interest if you go beyond 12 months. These figures come from the general Spanish tax code rather than a Balearic-specific rule, so they apply to ITP and AJD self-assessments the same way they would apply elsewhere in Spain. It is best to confirm the exact amount with your lawyer or gestor if you are already past the deadline.

Is the €3,000,000 Wealth Tax exemption per person?

Yes. The exemption applies per individual taxpayer, per registered owner, not per property or per household. If a couple buys jointly and each holds 50%, each person gets their own €3,000,000 exemption.

Do I need to pay non-resident income tax if I do not rent out the property?

Yes. Even if the property sits empty all year, Spain assumes a theoretical rental income and taxes it through the annual Modelo 210 return. Renting it out simply changes what is being taxed: actual rental income instead of the assumed figure.

Are these taxes the same in Ibiza and Menorca as in Mallorca?

ITP, AJD, and Wealth Tax are set at the regional level by the Balearic Islands government, so the rates and thresholds are identical across Mallorca, Ibiza, and Menorca. Annual local taxes such as IBI and garbage collection, however, are set by each town hall individually, so those can vary from one municipality to another, even within the same island.

Does the Wealth Tax apply only to my property, or to all my assets in Spain?

It covers your full net worth, not just real estate. Bank accounts, investments, vehicles, and other assets are included alongside the property. Non-residents are only assessed on what they hold in Spain; residents are assessed on everything they own worldwide.