Taxes to consider when buying a Property on Mallorca in 2025

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. At Balearic Properties, we simplify this process so you can focus on finding your dream home.

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 need to pay Value Added Tax (VAT), known as IVA in Spain, which is 10% of the purchase price. This tax must be paid on the day of purchase. This is a direct way to ensure a luxury villa or a modern apartment is fully updated and ready to be enjoyed.

Existing Homes

For second-hand properties purchased from a private seller, you will need to pay Property Transfer Tax (ITP). The applicable rate depends on the purchase price, and this tax must be paid within 30 days after the signing of the deed. This makes buying a traditional estate or a village house even more attractive, as you can enjoy unique features and lower tax implications.

Additionally, the Documented Legal Acts Tax must be paid, with a standard rate of 1.5%. For properties valued at more than €1,000,000, this rate increases to 2%. This tax must be paid within 30 days after signing the purchase deed. At Balearic Properties, we assist you at every step of the process, ensuring you are informed and helping you minimise stress.

Calculation of Taxes for Property Purchase

The total tax liability for buying a property in Mallorca is determined using a tiered structure. Each tier of the property value is subject to a different rate, as detailed below:

• For the tier of €1 to €400,000, an 8% rate is paid.
• For the tier of €400,001 to €600,000, a 9% rate is paid.
• For the tier of €600,001 to €1,000,000, a 10% rate is paid.
• For the tier of €1,000,001 to €2,000,000, a 12% rate is paid.
• For the tier above €2,000,001, a 13% rate is paid.

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

Examples of Tax Calculations

Example 1: Purchase Price of €650,000

• For the tier of €1 to €400,000, 8% = €32,000
• For the tier of €400,001 to €600,000, 9% = €18,000
• For the tier of €600,001 to €650,000, 10% = €5,000
• Total Taxes to Pay: €32,000 + €18,000 + €5,000 = €55,000

Example 2: Purchase Price of €2.5 Million

• For the tier of €1 to €400,000, 8% = €32,000
• For the tier of €400,001 to €600,000, 9% = €18,000
• For the tier of €600,001 to €1,000,000, 10% = €40,000
• For the tier of €1,000,001 to €2,000,000, 12% = €120,000
• For the tier above €2,000,001, 13% = €64,999
• Total Taxes to Pay: €32,000 + €18,000 + €40,000 + €120,000 + €64,999 = €274,999

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.

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. It is a manageable cost that helps maintain the island's infrastructure, ensuring your property remains part of a well-maintained community.
• Garbage Collection Tax: This tax is collected by the local municipality to cover waste management services. It is a small cost that contributes to Mallorca's commitment to keeping the island clean and beautiful.
• Incineration Tax: In some areas, an additional tax is applied to cover the costs of waste incineration, often combined with the garbage collection tax. Again, this helps keep Mallorca's environment pristine, one of the many reasons why so many people choose to make this island their home.
• Non-Resident Income Tax: If you are not a Spanish resident, you must file an annual tax return for non-residents (tax code 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. Renting your property can be an excellent way to generate income when you are not using it, and we can help you understand how this tax applies.
• Wealth Tax: Wealth tax applies to both residents and non-residents, but only on assets held in Spain. The Balearic Islands impose a wealth tax ranging from 0.28% to 3.45%, depending on the value of your assets. For non-residents, this tax only applies if your Spanish assets exceed €3,000,000. In such cases, only the value above this threshold is taxed. For Spanish residents, wealth tax covers all global assets, with a deduction of €3,000,000 plus an additional €300,000 for the primary residence.

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 help you make this dream come true.