Property in Mallorca is subject to tax. Which taxes apply and how high the taxes are depends on the value of the property and its use.
The regulations on self-assessment in Spain (autoliquidación) allow many property owners to act carefree. It is not the tax authorities that determine what has to be paid - the taxpayer must submit all the necessary declarations and documents on time and make the corresponding payments. The tax authorities only carry out spot checks or if the data provided differs from the information available.
The tax office is also not very lenient towards foreign property owners. In other words: Those who miss deadlines pay penalties. It is therefore important to plan your tax year in good time, especially as a non-resident.
Self-use tax
This must be paid by anyone who owns a property but neither uses it as their main residence nor rents it out. A fictitious use value is therefore taxed. This is based on the cadastral value of the property. As a rule of thumb, foreign owners from EU countries pay 19 percent tax on 1.1 or 2 percent of the corresponding value. This is calculated for each day of the year on which the (second) property is not rented out. The tax is due on December 31 of the following year.
Property tax
The property tax (IBI or impuesto sobre bienes inmuebles) is levied by the municipality, which informs the taxpayer of the levy in good time. As with the self-use tax, the respective cadastral value of the property is used for the calculation. The following are standard values: For properties on building land (urbanas), the rate is between 0.4 and 1.1 percent, for properties in rural areas (rústicas) between 0.3 and 0.9 percent. The taxpayer is the owner of the property on the first day of the year. The tax is paid once a year after the tax assessment notice has been issued. A direct debit authorization can also be issued for the property tax.
Property tax
Currently, foreign property owners have a tax-free allowance of 700,000 euros per person. Anyone who exceeds this amount as a non-resident must pay taxes. The amount is based on either the national or the Autonomous Community scale. Taxpayers have the right to choose here. It is worth comparing: some autonomous communities, such as the Balearic Islands, charge 3.45 percent, while the Spanish central government in Madrid waives the wealth tax and issues a credit note.
The highest of the following criteria is decisive for the property value: Net purchase price, cadastral value or the value established as the basis for calculating another tax. The cut-off date is December 31 of the respective year, the submission deadline is six months and ends on June 30 of the following year.
Income tax on rented property
If you rent out your property purely as a vacation home, you are exempt from VAT but must pay income tax. For other rentals, both sales tax and income tax are payable. Tax must be paid quarterly by the 20th of the month following the quarter in question. As an EU citizen, a preferential tax rate of 19 percent can be applied and the costs claimed. A tax advisor or tax consultant should calculate exactly how this is calculated. It should also be remembered that the self-use tax described above is payable for the days not rented out.
Rentals with VAT liability
If the property is not rented out exclusively for residential purposes, VAT must be paid, which is usually borne by the tenant. Examples include the letting of business premises or warehouses. VAT is also paid quarterly, on the 20th of the following month (20.04., 20.07., 20.10. and - exception - 30.01.).
Holiday rentals are not always VAT-exempt
No rules and exceptions. This also applies to the vacation rental of real estate. VAT applies if the property is offered for up to 30 days not only for living but also for other uses. This automatically turns the private non-resident into a trader who is not offering living space but a business premises. The corporation tax is 25 percent. This should always be handled by a tax advisor or a tax consultant.
Marc Fischer
