Mallorca Property Taxes for Non-Residents: Complete Guide 2025-2026

Last Updated: December 2025

Understanding the full tax implications before purchasing luxury property in Mallorca can save substantial sums and avoid unpleasant surprises. This guide covers the complete tax landscape for non-resident buyers in 2025-2026, from acquisition costs through annual obligations to eventual sale or inheritance. The Balearic Islands have undergone significant tax reforms since 2023, including a dramatic increase in wealth tax exemptions and near-elimination of inheritance tax for close relatives. For UK buyers post-Brexit, the picture has both complications (higher rental income tax rates, loss of certain deductions) and recent developments (a July 2025 court ruling may restore expense deductions). We’ll cover verified current rates, practical calculations, and structuring strategies that sophisticated buyers should consider.

Contents

• What taxes apply when purchasing a Mallorca property?
• How much is annual property tax in Mallorca?
• What wealth tax obligations do non-residents face?
• How are non-residents taxed on rental income?
• What tax applies when selling a Mallorca property?
• How does inheritance tax affect non-resident property owners?
• What tax treaty benefits exist for UK buyers?
• How can non-residents structure ownership for tax efficiency?
• What are the filing deadlines and compliance requirements?
• Which professional advisors should non-residents engage?

What taxes apply when purchasing a Mallorca property?

Property transfer tax (Impuesto sobre Transmisiones Patrimoniales or ITP) represents the largest upfront cost for resale property purchases. The Balearic Islands apply progressive rates based on purchase price:

• Properties up to €400,000: 8%
• €400,001 to €600,000: 9%
• €600,001 to €1,000,000: 10%
• €1,000,001 to €2,000,000: 12%
• Over €2,000,000: 13%

The progressive structure means you pay different rates on different portions of the purchase price. For a €5M property:

• First €400,000 @ 8% = €32,000
• Next €200,000 (€400,001-€600,000) @ 9% = €18,000
• Next €400,000 (€600,001-€1,000,000) @ 10% = €40,000
• Next €1,000,000 (€1,000,001-€2,000,000) @ 12% = €120,000
• Remaining €3,000,000 (over €2,000,000) @ 13% = €390,000
• Total transfer tax: €600,000 (12% effective rate)

This tax must be paid within 30 days of signing the escritura (title deed) at the notary using Form 600 submitted to the Balearic Tax Agency (ATIB). Late payment triggers penalties and interest charges.

New construction properties follow different taxation. Instead of ITP, buyers pay VAT (IVA) at 10% of purchase price plus stamp duty (Actos Jurídicos Documentados or AJD):

• VAT: 10% of purchase price
• Stamp duty: 1.5% for properties up to €1M, 2% for properties over €1M

For a €3M new-build villa:

• VAT: €300,000 (10%)
• Stamp duty: €60,000 (2%)
• Total: €360,000 (12% effective rate)

Legal fees add approximately 1% of purchase price (€30,000-€50,000 for €3M-€5M properties). Notary fees run €2,000-€4,000 regardless of property value. Land registry fees add €1,500-€3,000.

NIE number (Número de Identidad de Extranjero) acquisition proves mandatory for all property transactions. Foreign buyers must obtain NIE from Spanish consulate in their home country or through power of attorney in Spain. No direct cost, but legal assistance typically runs €300-€600.

Purchase Tax Comparison 2025

How much is annual property tax in Mallorca?

IBI (Impuesto sobre Bienes Inmuebles) functions as annual property tax levied by municipalities based on cadastral value. Unlike market value, cadastral value represents administrative valuation used for tax purposes, typically running 40-60% of market value for established properties.

Municipal councils set IBI rates within ranges prescribed by Spanish law. Mallorca municipalities charge approximately:

• Palma: 0.79% of cadastral value
• Andratx: 0.71% of cadastral value
• Deià: 0.68% of cadastral value
• Calvià: 0.73% of cadastral value
• Pollença: 0.75% of cadastral value

Cadastral values for luxury properties typically lag market values significantly. A €5M Port d’Andratx villa might show €2M-€3M cadastral value. At 0.71% IBI rate, annual tax runs €14,200-€21,300.

The calculation:

• Market value: €5,000,000
• Cadastral value: €2,500,000 (50% of market, typical for luxury)
• IBI rate: 0.71% (Andratx)
• Annual IBI: €17,750

IBI bills arrive annually (usually July-September) with payment due within the specified timeframe (typically 2 months). Most property owners arrange direct debit for automatic payment. Late payment incurs surcharges: 5% within 3 months, 10% within 6 months, 15% thereafter.

Community fees (cuota de comunidad) apply to properties within developments, apartment buildings, or gated communities. These vary dramatically:

• Palma apartments: €150-€400 monthly (€1,800-€4,800 annually)
• Gated villa developments: €300-€800 monthly (€3,600-€9,600 annually)
• Luxury resort communities: €500-€1,200 monthly (€6,000-€14,400 annually)

Rubbish collection tax (tasa de basuras) runs €150-€400 annually depending on municipality and property size.

Annual Property Costs Comparison

What wealth tax obligations do non-residents face?

Wealth tax (Impuesto sobre el Patrimonio) underwent major reform in the Balearic Islands effective January 2024. The tax-free allowance increased from €700,000 to €3,000,000 per individual, dramatically reducing tax burden for most luxury property owners.

Non-resident property owners pay wealth tax only on Spanish assets. A British citizen owning a €5M Mallorca villa (and no other Spanish assets) pays wealth tax only on that property’s value, not on UK investments, UK property, or other global assets.

The current Balearic Islands wealth tax structure (effective 2024 onwards):

• First €3,000,000: exempt (per individual)
• €3,000,001 to €5,454,958: 2.35%
• €5,454,959 to €10,909,915: 2.9%
• Over €10,909,915: 3.45%

For a single owner with €5M property:

• Exempt amount: €3,000,000
• Taxable amount: €2,000,000
• Tax rate: 2.35%
• Annual wealth tax: approximately €47,000

For married couples owning jointly (each owning 50%):

• Each spouse’s share: €2,500,000
• Each spouse’s exempt amount: €3,000,000
• Taxable amount: €0
• Annual wealth tax: €0

This joint ownership structure eliminates regional wealth tax for properties up to €6M. It’s why tax advisors routinely recommend joint ownership for married couples.

The Solidarity Tax on Large Fortunes

Critical to understand: Spain introduced a national Solidarity Tax (Impuesto Temporal de Solidaridad de las Grandes Fortunas) in 2022, initially temporary but now extended through at least 2025. This tax applies to net wealth exceeding €3 million and was designed to ensure wealthy individuals in regions with high relief (like the Balearics, Madrid, or Andalucía) still contribute.

The Solidarity Tax rates:

• First €3,000,000: exempt
• €3,000,001 to €5,347,998: 1.7%
• €5,347,999 to €10,695,996: 2.1%
• Over €10,695,996: 3.5%

The crucial rule: regional wealth tax paid is fully deductible from Solidarity Tax liability. You don’t pay both taxes on the same assets. If you pay €47,000 in Balearic wealth tax on a €5M property, this offsets your Solidarity Tax bill.

For non-residents, Spanish-based assets only count toward the €3M threshold. If your Mallorca property is worth €2.5M and you have no other Spanish assets, neither regional wealth tax nor Solidarity Tax applies.

Important correction: Mortgage debt does reduce your taxable wealth base. If you own a €5M property with €2M mortgage, your net wealth for tax purposes is €3M, not €5M. This differs from some earlier guidance suggesting otherwise.

Wealth tax filing deadline: June 30 annually, covering assets held as of December 31 previous year. Electronic filing mandatory. Form 714 (Modelo 714) captures wealth tax declaration.

Wealth Tax Impact 2025

How are non-residents taxed on rental income?

This section has been substantially updated following a significant court ruling in July 2025 that changes tax treatment for non-EU property owners.

Pre-July 2025: The Two-Tier System

Until July 2025, non-resident rental income taxation followed different rules depending on nationality:

EU/EEA residents:

• Tax rate: 19% on NET rental income
• Deductions allowed: IBI, community fees, insurance, utilities, management fees, repairs, maintenance, mortgage interest, property depreciation (3% annually of building value)

Non-EU residents (including UK post-Brexit):

• Tax rate: 24% on GROSS rental income
• No deductions permitted whatsoever

This created a substantial disadvantage for UK buyers. A property generating €120,000 annual rental income with €65,000 deductible expenses would face:

• EU owner: 19% of €55,000 (net) = €10,450 tax
• UK owner: 24% of €120,000 (gross) = €28,800 tax

The July 2025 Court Ruling: A Game-Changer

On 28 July 2025, Spain’s Audiencia Nacional (National Court) issued a landmark ruling (Case 636/2021, Judgment 3630/2025) that fundamentally changes this landscape. The court held that denying expense deductions to non-EU landlords violates EU law, specifically Article 63 of the Treaty on the Functioning of the European Union (TFEU) protecting free movement of capital.

Key implications:

• Non-EU property owners can now deduct the same expenses as EU/EEA residents
• Taxation should be on NET income (gross minus allowable expenses), not gross income alone
• The rate for non-EU remains 24%, but applied to net income after deductions
• Non-EU owners can claim refunds for overpaid taxes from the last 4 years

Important caveats:

• This is a judicial ruling, not legislative change
• The State Attorney’s Office has appealed to the Supreme Court
• Form 210 has not yet been updated to accommodate non-EU expense claims
• The Spanish tax authority (Agencia Tributaria) has not officially changed its administrative practice

Practical approach for UK owners in 2025-2026:

1. File Modelo 210 declaring gross income as currently required
2. Submit a separate rectification request claiming expense deductions
3. Keep comprehensive documentation of all rental expenses
4. Consider filing precautionary rectification requests for prior years (last 4 years) before statute of limitations expires
5. Seek professional advice on whether to wait for Supreme Court decision or proceed now

Allowable Expense Deductions

For those entitled to deductions (EU/EEA residents, and potentially non-EU following the July 2025 ruling):

• IBI property tax
• Community fees
• Property insurance
• Utility costs (if owner-paid)
• Property management fees (typically 10-15% of gross rent)
• Repairs and maintenance
• Mortgage interest (if property mortgaged)
• Property depreciation (3% annually of building value, not land)
• Advertising and platform fees
• Cleaning costs (for tourist rentals)
• Legal and accounting fees

Depreciation calculation: A €3M property with €2.5M building value (separating land value) generates €75,000 annual depreciation deduction (3% of €2.5M). This non-cash deduction significantly reduces taxable income.

Filing Requirements

Since 2024, rental income is declared annually (previously quarterly). File Modelo 210 between January 1-20 of the year following the rental income. Income earned in 2025 must be reported January 1-20, 2026.

If your property is not rented, you still owe imputed income tax based on theoretical rental value: 1.1% or 2% of cadastral value, taxed at 19% (EU) or 24% (non-EU). This is filed annually by December 31 of the following year.

Rental Income Tax Comparison 2025-2026

What tax applies when selling a Mallorca property?

Capital gains tax (CGT) applies to profits realized on property sales. There is some ambiguity in the sources regarding rates for non-EU residents, so we present both interpretations.

The Rate Question: 19% or 24%?

Interpretation 1 (Lucas Fox, PWC): Capital gains from property sales are taxed at 19% for ALL non-residents, regardless of nationality. PWC states: “Capital gains obtained in Spain by non-residents without a PE are taxed at a rate of 19% when they are generated from transfers of assets.”

Interpretation 2 (Most other sources): EU/EEA non-residents pay 19%; non-EU residents (including UK) pay 24%.

Given this discrepancy, we recommend UK sellers:

1. Budget for 24% as worst-case scenario
2. Seek professional advice on the current interpretation
3. Be prepared to claim refund if 19% applies universally

Calculating Capital Gains

The taxable gain calculation:

• Sale price
• Less: original purchase price
• Less: purchase costs (transfer tax, legal fees, notary)
• Less: capital improvements (documented with invoices)
• Less: selling costs (estate agent commission, legal fees)
• Equals: taxable capital gain

Example for €5.5M sale:

• Purchase price (2020): €4,000,000
• Purchase costs: €440,000 (transfer tax, legal fees)
• Capital improvements: €200,000 (documented renovations)
• Total acquisition cost: €4,640,000
• Sale price (2025): €5,500,000
• Selling costs: €275,000 (5% agency commission)
• Net sale proceeds: €5,225,000
• Taxable gain: €585,000 (€5,225,000 – €4,640,000)
• Tax at 19%: €111,150
• Tax at 24%: €140,400

The 3% Withholding

When a non-resident sells property in Spain, the buyer must withhold 3% of the sale price and pay it directly to Spanish tax authorities (Modelo 211) within one month of the sale. This acts as advance payment against capital gains liability.

For a €5.5M sale, the buyer withholds €165,000. The seller then files Modelo 210 within 4 months of sale to calculate actual tax due:

• If actual tax (€111,150) is below withholding (€165,000), seller claims refund of €53,850
• If actual tax exceeds withholding, seller pays the difference

Refund processing typically takes 6-12 months. Plan cash flow accordingly.

Exemptions and Reliefs

EU/EEA non-residents only: May be exempt from CGT on gains from sale of habitual residence in Spain, provided full amount is reinvested in purchasing a new habitual residence. This relief does NOT extend to UK buyers post-Brexit.

Pre-1995 acquisitions: Properties acquired before December 31, 1994 may qualify for reduction coefficients on gains generated before January 20, 2006.

Capital losses: Can offset gains on other Spanish property sales in same year, but losses cannot carry forward or offset other income types.

Capital Gains Tax Scenarios

How does inheritance tax affect non-resident property owners?

The Balearic Islands have implemented dramatic inheritance tax reforms since 2023, culminating in Law 6/2025 (effective July 25, 2025) that essentially eliminates inheritance and gift tax for close relatives.

The Current Position (July 2025 Onwards)

Groups I and II (spouses, children, parents, grandchildren, grandparents):

• Inheritances: 100% tax exemption (since July 2023)
• Lifetime gifts: 100% tax exemption (since July 2025, under Law 6/2025)

This means a child inheriting a €5M property from a parent pays ZERO inheritance tax in the Balearic Islands.

Group III (siblings, nephews, nieces, uncles, aunts):

• Where deceased has no descendants: 60% reduction (increased from 50% in July 2025)
• Other Group III cases: 35% reduction (increased from 25%)

Group IV (more distant relatives, unrelated persons):

• No special reductions; standard progressive rates apply

Requirements for the Exemption

To claim the 100% exemption on property inheritance:

• The public deed must state the property value
• The declared value cannot exceed the reference value (valor de referencia) increased by 20%
• Heirs must still file inheritance tax returns (autoliquidación), even if no tax is due
• The recipient must maintain the property for at least 5 years

The Reference Value Trap

A critical planning point: if you declare property at market value substantially above the reference value, you lose the exemption and pay tax on the full amount. But declaring at reference value creates a lower acquisition cost for future capital gains calculation.

Example: Property with €3M market value, €2M reference value

• Declare at €2.4M (reference + 20%): Qualify for exemption, inherit tax-free
• Future sale at €3.5M: Capital gain calculated from €2.4M base = €1.1M gain
• Had you paid inheritance tax on €3M: Base would be €3M, future gain only €500,000

This trade-off requires careful analysis with a tax advisor.

Regional Deductions Still Available

Beyond the 100% exemption for close relatives, beneficiaries can claim:

• Family home reduction: Up to €180,000 per person if inheriting deceased’s primary residence and maintaining it for 5 years
• Personal allowances: €25,000 for Group II, €8,000 for Group III
• Disability allowances: Up to €300,000 additional for severe disability

UK-Spain Cross-Border Considerations

British owners face complexity because:

• UK inheritance tax (IHT) applies to worldwide assets for UK-domiciled individuals
• Spanish property falls within UK IHT estate
• UK-Spain tax treaty provides credit for Spanish tax paid
• With Spanish inheritance tax now effectively zero for close relatives, the full UK IHT applies
• UK IHT threshold: £325,000, rate 40% above threshold

A UK-domiciled parent leaving €5M Mallorca property to their child faces:

• Spanish inheritance tax: €0 (100% exemption)
• UK IHT: 40% of €5M = €2M (subject to available allowances and reliefs)

Cross-border estate planning is essential for UK families with Spanish property.

Inheritance Tax Summary 2025-2026

*Approximate figures; actual calculations depend on multiple factors including pre-existing wealth multipliers

What tax treaty benefits exist for UK buyers?

The UK-Spain double taxation treaty prevents paying full tax in both countries on the same income or gains. Understanding treaty provisions optimizes tax efficiency for British buyers.

Rental income: The treaty allows Spain to tax Spanish property rental income. The UK also taxes worldwide income for UK residents. The treaty provides credit mechanism: rental income reported on UK tax return with credit for Spanish tax paid. A higher-rate UK taxpayer (40%) pays net 21% additional (40% UK rate minus 19% Spanish credit for EU, or 16% net if paying 24% Spanish tax post-Brexit).

Capital gains: Primary taxing rights go to Spain for gains on Spanish property. UK also taxes worldwide gains for UK residents (rates 18% for basic-rate taxpayers, 24% for higher-rate). Treaty provides credit for Spanish tax paid.

Inheritance: The UK-Spain inheritance tax treaty prevents double taxation but operates through relief provisions. Spanish inheritance tax paid provides credit against UK IHT liability. With Spanish tax now zero for close relatives, full UK IHT may apply (subject to available reliefs).

Pension income: UK pensions generally remain taxable only in UK under treaty provisions, even for Spanish residents. However, Spanish residents must report pension income on Spanish returns for wealth tax calculations.

Treaty claims require proper filing: UK taxpayers must file with HMRC to claim foreign tax credit relief for Spanish taxes paid. This filing adds administrative complexity beyond standard UK tax returns, often requiring accountant assistance (£500-£1,500 annually).

UK-Spain Treaty Impact Summary

How can non-residents structure ownership for tax efficiency?

Ownership structure decisions affect annual tax costs, inheritance planning, and eventual sale taxation. The primary options: individual ownership, joint ownership (married couples), Spanish company ownership, and trust structures.

Individual ownership proves simplest but potentially most tax-expensive. Single owner pays full wealth tax above €3M threshold. Upon death, entire property value passes through inheritance tax. Administration remains straightforward.

Best for: Single individuals, buyers prioritizing simplicity, properties under €3M.

Joint ownership (married couples) delivers immediate wealth tax benefits. Each spouse owns 50%, each claiming €3M exemption. Properties up to €6M incur zero regional wealth tax. Upon first death, survivor may benefit from the 100% inheritance exemption.

Best for: Married couples, properties €3M-€6M, buyers prioritizing wealth tax minimization.

Spanish SL company ownership (Sociedad Limitada) creates corporate property holder. Individuals own company shares rather than property directly.

Potential advantages:

• Share transfers (inheritance or sale) may prove simpler than property transfers
• Company continues existing regardless of shareholder changes
• Some estate planning flexibility

Disadvantages:

• Annual corporate filings and accounts (€2,000-€4,000 professional fees)
• Corporate tax on rental income before distribution
• Property transfer to company triggers transfer tax
• Potential 3% annual imputed income tax if company isn’t Spanish tax resident
• No wealth tax advantage (shareholders pay wealth tax on share value)

Best for: Complex family structures, multi-generational planning, property generating rental income through property management business.

Offshore company ownership (Gibraltar, UK, other) offers limited advantages after Spanish tax law changes. Spanish authorities charge 3% annual imputed income tax on cadastral value for properties owned by non-Spanish-resident companies. For €5M property with €2.5M cadastral value, that’s €75,000 annually. Enhanced scrutiny and professional costs (€5,000-€10,000 annually) rarely justify this structure for residential property.

Best for: Essentially no one purchasing residential property for personal use.

Trust structures: Spanish law doesn’t recognize trusts, creating legal complexity. For Spanish law purposes, trust property may be treated as belonging to trustees personally. Tax authorities may challenge trust treatment. Cross-border advice essential before pursuing.

Ownership Structure Comparison

What are the filing deadlines and compliance requirements?

Non-resident property owners face multiple tax filing obligations with distinct deadlines. Missing deadlines triggers penalties ranging from minor (€100) to substantial (20% of tax due).

Annual wealth tax (Modelo 714)

• Filing deadline: June 30 annually
• Covers assets held as of December 31 previous year
• Required if Spanish assets exceed €3M threshold, or gross assets exceed €2M
• Electronic filing mandatory for non-residents
• Penalty for late filing: €100 minimum, up to €500 depending on delay

Rental income tax (Modelo 210)

• Filing period: January 1-20 of year following rental income
• Income earned in 2025: File January 1-20, 2026
• Note: Changed from quarterly to annual filing in 2024
• Penalty: 5-20% of tax due depending on delay length

Non-resident imputed income (Modelo 210) – for non-rented property

• Annual filing by December 31 of following year
• Tax on theoretical rental value: 1.1% or 2% of cadastral value
• Many owners neglect this filing, creating compliance risk
• Penalty: €100-€300 typically for late filing

Capital gains tax (Modelo 210)

• File within 4 months of sale completion
• Property sold in March: file by end of July
• Property sold in November: file by end of March following year
• Penalty: 5% surcharge if filing within 3 months of deadline, escalating thereafter

Inheritance tax (Modelo 650)

• Filing deadline: 6 months from date of death
• Extension possible to 12 months with 5% tax surcharge
• Must file even if no tax due (to claim exemption)
• Late filing triggers penalties: 5-20% depending on delay

Filing Calendar Summary

Which professional advisors should non-residents engage?

Tax complexity for non-resident property owners requires professional assistance. Three specialist types prove essential: Spanish tax advisors (gestor or asesor fiscal), cross-border tax accountants, and estate planning specialists.

Spanish tax advisors (gestores or asesores fiscales) handle local tax compliance. They prepare and file rental income returns, annual wealth tax declarations, and imputed income filings. Costs: €800-€2,000 annually for property with rental income, €500-€1,000 for non-rented property requiring only wealth tax and imputed income filings.

These professionals should demonstrate:

• Experience with non-resident taxation specifically
• English language capability
• Electronic filing credentials with Agencia Tributaria
• Professional indemnity insurance
• Membership in professional body (Colegio de Gestores, Registro de Asesores Fiscales)

UK accountants with Spanish property expertise handle UK tax return aspects including foreign income reporting, tax credit claims, and capital gains declarations. They coordinate with Spanish tax advisors to ensure consistent reporting. Costs: £500-£2,000 annually depending on complexity.

Cross-border estate planning lawyers advise on ownership structuring, inheritance tax mitigation, and will preparation. Spanish property requires Spanish will (separate from UK will) for efficient estate administration. Dual wills prevent Spanish property distribution requiring UK probate validation in Spanish courts, a process extending 18-24 months.

Estate planning fees:

• Simple Spanish will: €500-€1,200
• Ownership structure review: €2,000-€5,000
• Comprehensive cross-border estate plan: €5,000-€15,000

Professional engagement sequence:

1. Pre-purchase: Estate planning lawyer reviews circumstances, recommends ownership structure (2-4 weeks before signing)
2. Purchase: Spanish lawyer handles conveyancing with structure recommendations (during transaction)
3. Post-purchase: Spanish tax advisor establishes annual compliance system (within 3 months)
4. Annual: Spanish tax advisor handles filings, UK accountant handles UK returns (ongoing)
5. Changes: Estate planning lawyer updates when circumstances change (as needed)

Professional Advisor Costs Summary

Frequently Asked Questions

What is the transfer tax rate for buying a €5M property in Mallorca?
The effective rate is approximately 12%. The Balearic Islands apply progressive rates: 8% on the first €400,000, 9% on €400,001-€600,000, 10% on €600,001-€1,000,000, 12% on €1,000,001-€2,000,000, and 13% above €2,000,000. Total tax on €5M property: €600,000.

Has the July 2025 court ruling changed rental tax for UK owners?
Yes, potentially significantly. The Audiencia Nacional ruled that non-EU owners can deduct expenses from rental income, paying 24% on net income rather than gross. However, this ruling is under appeal to the Supreme Court and Form 210 hasn’t been updated. UK owners should file as currently required and submit rectification requests to claim deductions.

What is the wealth tax threshold in the Balearic Islands?
Since January 2024, the regional wealth tax exemption is €3,000,000 per individual. Married couples owning jointly can effectively shelter €6,000,000 from regional wealth tax. However, the national Solidarity Tax also applies to Spanish assets exceeding €3 million.

Do UK buyers pay inheritance tax on Mallorca property?
Under current Balearic rules, close relatives (spouses, children, parents) pay zero Spanish inheritance tax due to the 100% exemption. However, UK-domiciled individuals remain liable for UK inheritance tax on worldwide assets, including Spanish property, at 40% above the £325,000 threshold.

What is the capital gains tax rate for non-EU sellers?
Sources conflict on this point. Some authoritative sources state 19% applies to all non-residents on property sale gains. Others maintain 19% for EU/EEA and 24% for non-EU. We recommend budgeting for 24% and seeking professional advice on the current position.

How has inheritance tax changed in the Balearics since 2023?
Dramatically. Since July 2023, inheritances to close relatives (Groups I and II) have a 100% exemption. Law 6/2025 (July 2025) extended this to lifetime gifts. Siblings and nephews/nieces now receive 60% reduction (up from 50%). The old progressive rates (1%-20%) effectively no longer apply to close family members.

Is rental income filing quarterly or annual?
Annual, since 2024. File Modelo 210 between January 1-20 of the year following the rental income. Income earned in 2025 must be reported January 1-20, 2026.

Key Takeaways

The Balearic Islands have become significantly more tax-friendly for luxury property owners since 2023. The €3M wealth tax exemption (effective 2024) and 100% inheritance tax elimination for close relatives (effective 2023, extended to gifts in 2025) dramatically reduce ongoing costs and estate planning complexity. However, non-EU buyers, particularly UK nationals post-Brexit, face higher rental income tax rates (24% vs 19%) and loss of certain CGT exemptions, though the July 2025 court ruling may restore expense deductions. UK buyers must also contend with UK inheritance tax applying to Spanish property, even when Spanish tax is zero. Professional advice remains essential given cross-border complexity and evolving legal interpretations.

Note: Tax information reflects Spanish and Balearic Islands tax law as of December 2025 and UK-Spain tax treaty provisions. The July 2025 Audiencia Nacional ruling on rental income deductions is under appeal. Individual circumstances vary. This guide provides general information only; readers should obtain professional advice specific to their situation. Tax rates, allowances, and exemptions subject to change through legislative process.

Related Articles

• Mallorca Luxury Property Market: Complete Investment Guide 2026
• Brexit Impact on British Buyers: Mallorca Property Guide
• Spain’s Golden Visa Ended: Residency Options for Mallorca Property Buyers
• Mallorca Property Purchase: Complete Legal Process Guide

For exclusive access to Mallorca’s most exceptional luxury properties and comprehensive market insight, contact our specialized advisory team at mallorca@blackprive.com

Author Bio

Alexander Thornbury MRICS specialises in Mediterranean luxury property markets and cross-border investment structuring for UHNWI clients. With 15 years advising on European real estate transactions exceeding €500 million in aggregate value, Alexander provides institutional-grade analysis of legal processes, due diligence requirements, and transaction risk mitigation strategies. His expertise in Spanish property law and Balearic market customs helps international buyers navigate complex legal frameworks protecting seven-figure investments.

His analysis is for informational purposes only and does not constitute legal, tax, or investment advice.

References and Sources

• Transfer Tax & Purchase Costs: Transfer tax rates and purchase costs verified through ATIB (Agencia Tributaria de las Illes Balears) official ITP rates and Balearic Properties 2025 tax guidance.
• Wealth Tax & Solidarity Tax: 2024 wealth tax reform (€700,000 to €3,000,000 exemption increase) verified through Blevins Franks February 2024 and April 2025 analysis, PWC Tax Summaries Spain, and Skybound Wealth 2025 HNW tax guidance.
• Rental Income Taxation: July 2025 court ruling verified through Audiencia Nacional Judgment 3630/2025 (28 July 2025, Case 636/2021). Analysis from Costa Luz Lawyers, PropertyWire, and idealista News.
• Capital Gains Tax: CGT rates and calculations verified through PWC Tax Summaries Spain income determination guidance, and Balcells Group news.
• Inheritance & Gift Tax: Law 6/2025 (effective 25 July 2025) 100% exemption for close relatives verified through Blevins Franks August 2025 analysis, Cuatrecasas September 2025 Balearic tax updates, and PCC Wealth June 2025 inheritance tax guide.
• Filing Requirements: Annual filing deadlines and compliance obligations verified through UK Property Accountants Novembner 2025 guidance and PTI Returns November 2025 non-resident property tax guide.

Methodology Note All tax rates verified against primary sources including PWC Tax Summaries, Spanish Tax Agency (Agencia Tributaria) official guidance, and recent court rulings. Where sources conflict (particularly on CGT rates for non-EU residents), both interpretations are presented. Tax law changes rapidly; readers should verify current rates with qualified advisors before making decisions.