Buying a property in Mallorca involves far more than the asking price. Before signing any contract, it is essential to have a precise understanding of all the taxes and costs associated with the transaction. For buyers who are not tax residents in Spain, the tax burden has important particularities that must be analysed in detail from the very outset. Failing to do so can result in significant financial surprises and, in some cases, tax non-compliance with legal consequences. This guide provides a comprehensive explanation of all the taxes affecting property purchases in Mallorca for non-residents, with practical examples and comparison tables.
What taxes are paid when buying a property in Mallorca?
Second-hand property: Transfer Tax (ITP)
The Impuesto sobre Transmisiones Patrimoniales (ITP), or Property Transfer Tax, is the main tax payable when acquiring a second-hand property in Spain. In the Balearic Islands, this tax is progressive and is administered by the Balearic Tax Agency (ATIB). Unlike other Spanish regions that apply a flat rate, the Balearic Islands set progressive brackets based on the property value, meaning that the higher the price, the greater the percentage applied on the upper tranches. This progressive structure can have a significant impact on high-value properties, which are common in the Mallorcan market.
- Up to €400,000: 8%
- From €400,001 to €600,000: 9%
- From €600,001 to €1,000,000: 10%
- Above €1,000,000: 11%
To illustrate with a practical example: if you purchase a second-hand property in Mallorca for €500,000, the Transfer Tax is not calculated by applying a single flat rate to the total. Instead it is calculated progressively by bracket. On the first €400,000 you pay 8% (€32,000), and on the remaining €100,000 you pay 9% (€9,000). In total, the Transfer Tax amounts to €41,000, equivalent to an effective rate of 8.2% on the total transaction price. It is important to note that the tax base for Transfer Tax is the higher of the sale price and the cadastral reference value set by the Tax Administration, which may increase the tax bill even when the agreed price between the parties is lower.
New-build property: VAT and Stamp Duty (AJD)
When the property is newly built and purchased directly from the developer, Transfer Tax does not apply. Instead, two different taxes are payable: Value Added Tax (VAT) and Stamp Duty (Actos Jurídicos Documentados, or AJD). The VAT applicable to the purchase of a standard new-build residential property is 10% of the sale price. For parking spaces purchased together with the property (up to two spaces), the rate is also 10%. For commercial premises, offices or other non-residential properties, VAT is 21%. In addition to this, Stamp Duty in the Balearic Islands is levied at 1.2% of the notarised value. Stamp Duty covers the formalisation of the contract as a public deed, and while its amount may appear smaller than Transfer Tax, it represents a significant sum for high-value properties. In summary, for a new-build property at €500,000, you would pay €50,000 in VAT plus €6,000 in Stamp Duty — a total of €56,000 in taxes, representing an additional 11.2% on top of the agreed price.
Other costs when buying a property in Mallorca
In addition to the taxes directly associated with the purchase, there are other costs that the buyer must bear and which are frequently underestimated. These costs apply regardless of whether the property is new or second-hand, and can add between €1,500 and €3,000 to the total bill, depending on the value of the property.
- Notary fees: between €600 and €1,500 depending on the property value
- Land Registry: between €400 and €800
- Gestoría (administrative agent): between €300 and €600
- Valuation (if applying for a mortgage): between €300 and €600
Taxes specific to non-resident buyers in Spain
The NIE: essential for buying property
The NIE (Número de Identificación de Extranjero) is the tax identification number assigned to foreign nationals by the Spanish Administration. Without a NIE it is impossible to complete a property purchase in Spain: the notary will not authorise the deed unless the buyer can evidence their NIE. Beyond the notarial closing, the NIE is also required to open a bank account in Spain, pay the taxes arising from the purchase, apply for a mortgage and fulfil periodic tax obligations as a non-resident property owner. EU citizens can obtain a NIE at any Police Station with jurisdiction over foreigners in Spain, by prior appointment, or at the Spanish Consulate in their country of residence. Non-EU citizens follow the same procedure, although in some cases additional documentation may be required. Processing times range from one to four weeks depending on the route chosen and the workload of the processing offices. A very practical solution for buyers who do not reside in Spain or who find it difficult to travel is to grant a notarial power of attorney to a lawyer in Spain to process the NIE on their behalf.
IRNR: annual tax obligations as a non-resident property owner
Once you own a property in Spain without being a tax resident there, you automatically become liable to pay the Non-Resident Income Tax (IRNR). Even if you do not rent the property out or generate any income from it, Spanish law presumes that you are obtaining income simply by virtue of being the owner. This concept is known as imputación de rentas (deemed rental income), and is calculated as 1.1% of the property's cadastral value (or 2% if the cadastral value has not been revised in the last ten years). The IRNR tax rate is then applied to this deemed income. The rate varies depending on the owner's country of tax residence: residents in EU or EEA countries are taxed at 19%, while residents outside the EEA are taxed at 24%. The declaration is submitted annually using Form 210 (Modelo 210), and the filing deadline is during the calendar year following the year to which the deemed income relates. For example, for the imputed income of 2024, the filing deadline is during 2025.
3% retention on future sales
This is an aspect that many non-resident buyers are unaware of at the time of purchase, but which becomes relevant when the time comes to sell. When a non-resident sells a property in Spain, the buyer is legally required to withhold 3% of the sale price and pay it to the Tax Agency as a prepayment of the seller's IRNR liability. This means that at the notarial closing, the non-resident seller will receive 97% of the agreed price, with the remaining 3% retained as a withholding on account of any capital gain. If the actual gain is less than this retention, or if there is a capital loss, the seller is entitled to claim a refund of the difference by filing Form 210. This retention mechanism acts as a guarantee for the Spanish Administration, ensuring that non-residents do not sell and repatriate their capital without having paid tax on any gains made.
Wealth Tax (Impuesto sobre el Patrimonio)
Non-residents with assets in Spain are required to declare Wealth Tax on assets located in Spanish territory when the net value of those assets exceeds €700,000. This tax is administered at regional level, and in the Balearic Islands a progressive scale of rates ranging from 0.28% to 3.45% applies, depending on the net value of the taxable wealth. Unlike Personal Income Tax, non-residents are not entitled to the same personal exemptions as residents for Wealth Tax purposes, although the general exempt minimum of €700,000 does apply. For high-net-worth individuals, Wealth Tax can represent a significant annual amount that must be factored into the overall tax planning of the investment. It is worth noting that Wealth Tax interacts with Personal Income Tax through a joint tax liability cap mechanism, but this mechanism is not available to non-residents, making advance tax planning even more relevant.
Summary: how much does it cost in total to buy a property in Mallorca?
| Item | €300,000 property | €500,000 property | €1,000,000 property |
|---|---|---|---|
| Transfer Tax (second-hand) | €24,000 | €41,000 | €91,000 |
| Notary fees | ~€800 | ~€1,000 | ~€1,500 |
| Land Registry | ~€500 | ~€600 | ~€800 |
| Gestoría | ~€400 | ~€400 | ~€500 |
| Total approximate costs | ~€25,700 (8.6%) | ~€43,000 (8.6%) | ~€93,800 (9.4%) |
How to optimise the tax treatment of your purchase in Mallorca
Advance tax planning is one of the most relevant aspects of any property purchase, with the greatest potential impact on the overall financial outcome of the transaction. It is not merely about paying the correct taxes at the time of purchase, but about structuring the acquisition in a way that minimises the overall tax burden throughout the entire life of the investment: from the initial purchase through to the eventual sale or inheritance transfer. There are several strategic decisions that should be analysed with a specialist tax advisor before signing any documents:
- Personal purchase vs. holding company: depending on your situation, it may be more tax-efficient to acquire through a Spanish limited company (SL), especially if the property will generate rental income or if you are planning a future sale
- Double tax treaties: Spain has over 90 double taxation conventions that can reduce the total tax burden in your country of residence, allowing taxes paid in Spain to be offset
- Financing structure: the tax implications of a Spanish mortgage and of financing in your country of residence can be significant and should be analysed in a coordinated manner
- Fiscal representative: mandatory in some cases and always strongly recommended; this person handles periodic tax filings and manages the relationship with the Spanish Tax Agency on your behalf
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Speak to an advisor→Frequently asked questions
Can a foreigner buy a property in Mallorca?
Yes, absolutely. Spain does not impose any restrictions on property purchases by foreign nationals, whether from the European Union or from third countries. The process is essentially the same as for a Spanish citizen, with some administrative particularities such as obtaining a NIE beforehand and, in some cases, opening a bank account in Spain. Mallorca is one of the most popular destinations for international buyers across Europe, and the Spanish legal framework provides full legal certainty guarantees for foreign investors.
Is it better to buy in a personal name or through a company?
There is no single answer to this question: it depends on each buyer's individual tax situation, the number of properties they plan to acquire, the intended use of the property (primary residence, holiday rental, long-term investment) and future transfer plans. Generally speaking, purchasing through a Spanish limited company can be more tax-efficient when rental income is expected, when the overall property portfolio is substantial, or when facilitating generational transfer is a priority. A personal purchase is simpler to administer and may be more appropriate for a single property for personal use. We always recommend carrying out a prior tax analysis before making this decision.
What happens if I do not file the IRNR as a non-resident?
Failure to comply with tax obligations as a non-resident property owner can have significant financial consequences. The Spanish Tax Agency has tools to identify non-resident property owners who are not meeting their reporting obligations, including cross-referencing information with Land Registry records and the tax administrations of other countries with which Spain has information-sharing agreements. Penalties for failing to file Form 210 can include surcharges for late filing (ranging from 5% to 20% depending on the delay), late payment interest, and in more serious cases, formal penalties that can reach 50% of the undeclared tax liability. Furthermore, persistent non-compliance can complicate future transactions relating to the property, including any eventual sale.
