For rental properties in Mallorca whose income is also subject to taxation in Germany, a shorter actual remaining useful life can increase theannual depreciation rate from approximately 2% to as high as 8%. This is relevant for all owners who are subject to taxation in Germany. However, reliable evidence is crucial— and a clear distinction between German and Spanish tax law.
A rental property in Mallorca can have tax implications in two countries.
It does not matter whether the property is a vacation rental—short-term or long-term.
As the country where the property is located, Spain is entitled to tax the income derived from the property. For a person resident in Germany, income from Spanish real estate is generally also taken into account in the German tax system; the tax paid in Spain is credited in accordance with German rules in the cases provided for by the double taxation treaty.
This also brings into focus a provision of German income tax law that can have a significant impact on the annual depreciation of existing real estate: depreciation based on a shorter actual useful life.
What the remaining useful life has to do with AfA
AfA stands for „depreciation”. Simply put, the acquisition or construction costs of the building are spread out over its useful life for tax purposes. The value of the land is not depreciated.
§ Section 7 of the German Income Tax Act (EStG) initially uses statutory depreciation rates for buildings. For many residential buildingscompleted after 1924 and before 2023, the straight-line depreciation rate is, for example, 2 percent per year. Different rates apply to buildings completed in other time periods. However, the law allows for an exception: If the actual useful life is shorter than the standard useful life, the depreciation corresponding to this actual useful life may be applied instead.
The difference can be significant. If, for example, the depreciable portion of the building amounts to 500,000 euros in building value, a 2 percent annual depreciation rate results in 10,,000 euros. If an actual useful life of 25 years is demonstrated, this corresponds mathematically to 4 percent, or 20,000 euros annually.
However, this does not result in a higher overall depreciation of the property. The acquisition or production costs remain unchanged. Rather, a shorter useful life means that the tax expense is recognized more quickly.
Age alone is not enough
An older building does not automatically have a shorter remaining useful life for tax purposes.
According to the case law of the Federal Fiscal Court, factors such as technical wear and tear, economic depreciation, and legal circumstances, among other factors, influence the actual useful life. The burden of proof and determination for a shorter useful life lies with the taxpayer.
For a property in Mallorca, therefore, the condition, construction method, features, renovations, and—particularly in the case of Spanish apartments built between 1960 and 1990—the significantly poorer structural condition, as well as any renovations already carried out, neglected maintenance, and the actual economic, technical, and legal usability. Dampness, intense sunlight, or salty air can also take a toll on building components. However, such environmental conditions alone do not necessarily prove a shortened remaining useful life.
The specific building and its condition are decisive.
What a remaining useful life assessment must demonstrate
An expert appraisal may be used to provide this evidence. In 2024, the Federal Fiscal Court clarified that a single, specific standardized appraisal method—such as the Real Estate Valuation Ordinance—is not mandatory for this purpose.
There is an important distinction here: a mere reference to a table value calculated using a model is not sufficient. An expert appraisal report prepared by an appraiser licensed and accredited in Germany, whose report is based on a recognized valuation model and at the same time takes into account the actual conditions of the specific building, may, however, be suitable.
An appraisal report does not, therefore, necessarily have to prove that individual building components are technically nearing the end of their useful life. If, for example, the economic useful life is shorter than the technical one, this can also be taken into account for tax valuation purposes.
For owners, this means: What matters is not achieving the lowest possible numerical value, but rather a technically sound derivation of the actual remaining useful life.
What has changed since December 2025
The issue gained additional relevance at the end of 2025. In a letter dated December 1, 2025, the Federal Ministry of Finance completely revoked its letter of February 22, 2023, regarding depreciation based on a shorter actual useful life.
The earlier BMF letter had restricted the requirement for supporting evidence to expert opinions withadditional requirements. The Federal Fiscal Court had already ruled in 2024 that these requirements cannot, in any case, be derived entirely from the law. In particular, the Income Tax Act (EStG) does not mandatorily prescribe a specific appraisal method.
However, the repeal does not mean that every remaining useful life appraisal must be accepted by the tax office. The taxpayer must still provide plausible evidence of the shorter actual useful life.
Why the German depreciation method (AfA) may also be relevant in Mallorca
In the case of a person resident in Germany, Spain may tax income from a property located in the Balearic Islands. This explicitly applies as well toincome from renting or leasing.
For income from real property, the Germany–Spain DTA generally provides that, in the case of a person resident in Germany,provides for the crediting of Spanish tax paid against German tax in the case of a person resident in Germany, provided that the real estate does not actually form part of a permanent establishment in Spain.
For a private owner subject to tax in Germany, the property in Mallorca is therefore not excluded from the German tax context solely because it is located in Spain.
This is precisely where the actual remaining useful life may become relevant: If the rental income is calculated for German tax purposes, the depreciation on the building permitted under German lawdepreciation under German law may affect the taxable income. However, the specific treatment depends on the individual’s tax liability, the ownership structure, and the use of the property.
Do not confuse Spanish and German depreciation
It is important to distinguish between the two tax systems. A remaining useful life appraisal prepared for German tax purposes does not automatically change the tax depreciation in Spain.
Spain applies its own regulations for determining tax-deductible depreciation on rental properties. The German regulation under § 7(4) EStG and the Spanish tax treatment must therefore be examined separately.
This also applies to the appraisal itself: It is intended to demonstrate a potentially shorter actual useful life for the purposes of applying German income tax law.
When an audit may be appropriate
This topic can be particularly interesting for rented existing properties with a high proportion of the building eligible for depreciation. The greater the difference between the legally prescribed useful life and the actually verifiable useful life, the more the annual depreciation changes.
However, a valuation report is not automatically economically justified. In the case of a newer building that has been comprehensively modernized or is technically and economically viable for long-term use, the assessment may also conclude that no significantly shorter remaining useful life can be justified.
What actual remaining useful life can be determined for this specific building in a technically sound manner?
Before commissioning an appraisal, it should be clarified whether the rented property in Mallorca is actually subject to taxation in Germany under the specific circumstances, what depreciation base applies, and what effect a shorter remaining useful life is likely to have.
Only then can it be determined whether the expert assessment makes economic sense.
Tax advisors and experts each perform different tasks in this process: The tax advisor assesses the tax treatment and applies the depreciation in each specific case. The expert determines and justifies the actual remaining useful life of the building.
Lilo Geiger & Björn Keiluweit
Lilo Geiger offers remaining useful life appraisals in Mallorca as part of her work as an expert. Thanks to her accreditation in Germany through DIA Zert DIN 170024 certification and her public appointment and swearing-in by a German Chamber of Industry and Commerce (IHK), sheshe meets all the requirements for the German tax authorities to formally recognize the appraisal.
For owners with ties to Germany, this establishes the technical foundation upon which a tax advisor can assess the potential application of § 7(4), sentence 2, of the German Income Tax Act (EStG).
This does not guarantee a specific remaining useful life or approval by the competent tax office.
As of August 2026. This article is for general information purposes only and does not constitute individual tax advice.
