Taxpayers in Mallorca have many advantages
For many Mallorca fans and long-term vacationers, the question of tax liability arises: Do you want to remain liable for tax in your home country or pay it to the Spanish tax authorities in the future? The decision depends on many factors and should be made on a case-by-case basis.
Taxpayers should be aware of one basic rule: Anyone who is liable for tax in Spain pays tax on their worldwide income and assets. An exception applies to particularly wealthy people. Spain's tax authorities make an exception for these people and grant them the so-called "non-resident tax status". This means that the tax liability for worldwide assets and income is tax-free. Certain taxes apply to the majority of taxpayers in Mallorca and Spain.
Income tax
In terms of income tax, EU citizens and residents pay around a fifth less tax than non-EU citizens. Residents do not have to pay the annual non-resident income tax (NRIIT); they also do not have to pay income tax if their income from non-self-employed work is below the limit of 22,000 euros.
Another special feature applies to landlords of vacation properties. Owners of properties can benefit from tax relief, which can reduce the tax burden by up to 70 percent.
Inheritance tax
Most foreign heirs are not assessed for inheritance tax. This depends on the respective Autonomous Community. In the Balearic Islands, the tax rates depend on the relationship between the testator and the beneficiary, the value of the inheritance and the previous assets and range between one and just under 82 percent. We recommend consulting a lawyer specializing in inheritance law for the calculation.
Gift tax
Regional differences also apply to the impuesta denaciones. In Mallorca, gift recipients in tax classes I and II only have to pay a flat rate of 7 percent of the value of the gift.
Capital gains tax
When selling a property in Mallorca, just under three percent of the sales proceeds are withheld by the Spanish tax authorities. If the sales proceeds are invested in a new main residence in Spain or within the EU, the capital gains tax is waived. Persons over 65 may also be exempt from capital gains tax. Your lawyer will tell you the relevant requirements.
Income tax
In Spain, a personal, tax-free allowance applies to the occupants of a main residence, for each of the two partners. This means that couples can apply for a combined tax allowance for their main residence. How high this is varies from region to region.
In addition, there are possible tax reductions that the municipalities grant to residents. These can amount to up to 95 percent. One example is property tax, which can be over a third lower for residents.
Other advantages of residencia
Taxpayers in Spain also have many other advantages. They have access to state healthcare and the right to vote in local elections. When it comes to mortgage loans, residents receive better conditions from banks. Residents are also more trusted by landlords when it comes to rental contracts.
