Madeira, the Algarve and Mallorca answer the same wish, a sunny second home in southern Europe, under two very different tax systems. Madeira and the Algarve share Portugal’s rules, with Madeira’s regional twists. Mallorca runs on Spain’s, with the Balearic Islands’ own transfer tax on top. The differences show up most at three moments: the day you buy, every year you own, and the day the property passes on. This guide sets the three side by side for a buyer at around EUR 2M.
Two tax systems
Transfer taxes on EUR 2M, illustrative
Portugal 2023, Spain 2025
Official data in both countries
Last updated: October 2026
By: Alexander Thornbury
How do the three markets differ?
In scale first. Mallorca is by far the busiest: Palma airport handled 33.8 million passengers in 2025, with German travellers the largest group. The Algarve’s Faro airport passed 10 million passengers for the first time in 2025, at 10.4 million. Madeira’s airport reached a record 5.4 million. That ranking runs through everything else, from the depth of the property market to the choice of flights and the pace of summer.
Prices tell a related story. Portugal’s statistics office, INE, put the median price of homes sold in the Algarve at EUR 3,352 per square metre in the first quarter of 2026, against EUR 2,863 in Madeira, with buyers whose tax home is abroad paying medians of EUR 4,003 and EUR 3,295 respectively. Those are medians across all homes, not prime prices, and Spain’s official series is not directly comparable, so treat any cross-border price comparison with care. For Madeira on its own, start with our international buyer’s guide to Madeira; for Mallorca, our Mallorca luxury property guide.
Which is cheapest to buy into?
At prime prices, the Portuguese markets. A non-resident buying a home anywhere in Portugal now pays IMT at a flat 7.5% plus 0.8% stamp duty, about 8.3% in all, and at EUR 2M that is the same in Madeira as in the Algarve. Mallorca charges the Balearic transfer tax on resales, which rises in bands from 8% to 13% on the portion above EUR 2M. On a EUR 2M resale, that works out at EUR 210,000, against EUR 166,000 in either Portuguese market.
Below the prime threshold, the Portuguese picture shifts with residence. A Portuguese tax resident buying a second home in Madeira pays a flat 6% between EUR 792,414 and EUR 1,438,566, because Madeira’s IMT brackets are 25% higher than the mainland’s; in the Algarve the flat 7.5% already starts at EUR 1,150,853. Our Madeira property tax guide sets out the full table.
| Illustrative: EUR 2M resale, non-resident buyer | Madeira | Algarve | Mallorca |
|---|---|---|---|
| Transfer tax | IMT 7.5%: EUR 150,000 | IMT 7.5%: EUR 150,000 | Balearic ITP, 8% to 12% bands: EUR 210,000 |
| Stamp duty | 0.8%: EUR 16,000 | 0.8%: EUR 16,000 | Not charged on a resale |
| Total transfer taxes | EUR 166,000 (8.3%) | EUR 166,000 (8.3%) | EUR 210,000 (10.5%) |
Illustrative arithmetic on 2026 rates, assuming the price exceeds the tax valuation. Legal, notary and registration costs are extra in all three.
What does each cost to own?
Portugal’s annual charges are lighter and simpler. In Madeira, every municipality charges IMI, the property tax, at the minimum 0.3% of the tax office’s valuation; Algarve councils set their own rates between 0.3% and 0.45%. Portugal has no general wealth tax, and its one wealth-type charge, AIMI, applies only above EUR 600,000 of residential valuation per person. The same Portuguese rules apply in both markets.
Spain asks more of a non-resident owner. Besides the local IBI property tax, Spain taxes non-residents on a deemed income from a second home they do not let, and its wealth tax reaches non-residents’ Spanish assets above a EUR 700,000 exempt minimum, subject to regional rules. On top, Spain’s solidarity tax on large fortunes applies to net wealth above EUR 3M, at rates from 1.7% to 3.5%. For a buyer with a large Spanish estate, those annual taxes can add up to more than the difference in transfer tax over time.
How are rent and a sale taxed?
For rent, Portugal charges every non-resident a flat 25% on residential lettings. Spain splits by passport: 19% on net rent for EU and EEA residents, and 24% for everyone else, traditionally on the gross figure. So a British or American landlord pays 24% in Mallorca, traditionally on gross rent, against 25% in Madeira or the Algarve, while a German or Austrian pays 19% in Mallorca. In all three places, holiday letting is regulated locally. Funchal, for one, has barred new holiday lets in apartment buildings since June 2026, so check the licence position before counting on rental income.
On a sale, Spain charges non-residents a flat 19% on the gain, whatever their nationality. Portugal taxes half of the gain at its progressive rates, with worldwide income declared to set the rate, which works out at around a quarter of the gain at the top of the scale, before any solidarity surcharge. A high earner may therefore pay more on a Portuguese gain than on a Spanish one. Model the figures for your own case.
| Owning, letting and selling | Madeira | Algarve | Mallorca |
|---|---|---|---|
| Annual property tax | IMI 0.3% everywhere | IMI 0.3% to 0.45% by council | IBI, set by the council |
| Wealth taxes | AIMI above EUR 600,000 of valuation | AIMI above EUR 600,000 of valuation | Wealth tax above EUR 700,000; solidarity tax above EUR 3M |
| Rent, non-resident | 25% flat | 25% flat | 19% (EU/EEA) or 24% (others) |
| Gain on sale, non-resident | Half the gain at progressive rates | Half the gain at progressive rates | 19% flat |
| Airport passengers, 2025 | 5.4 million | 10.4 million (Faro) | 33.8 million (Palma) |
What about residency and inheritance?
None of the three sells residency any more. Portugal removed property from its golden visa on 7 October 2023, and Spain abolished its golden visa entirely with effect from 3 April 2025. EU citizens can live in any of them freely, and Swiss citizens under the free-movement agreement; British, American and other non-EU buyers have 90 days in any 180 and need a national visa to stay longer. For anyone who does move, Madeira has a distinctive advantage: from 2026 its residents pay income tax 30% below the Portuguese mainland in every band, a top rate of 33.6% against 48% in the Algarve. Our Madeira residency guide covers the routes.
On inheritance, both systems are kinder to close family than many buyers assume. Portugal has no inheritance tax as such, and spouses, partners, children and parents are exempt from its 10% stamp duty on inherited assets. The Balearic Islands exempt close relatives from inheritance tax on Balearic property since July 2025. Both countries apply forced-heirship rules, and in both a foreign national can choose the law of their nationality in a will under the EU Succession Regulation. Your home country’s inheritance tax applies on top, wherever you buy.
Which suits which buyer?
Mallorca suits buyers who want the deepest market, the most flights and a Mediterranean summer, and who can absorb a higher transfer tax and Spain’s wealth taxes. Its buyer base is heavily German, and a proposal to restrict non-resident purchases was rejected by the Balearic parliament in February 2026, so foreign buyers remain free to buy. The Algarve suits buyers who want Portugal’s lighter ownership taxes with a larger airport, more golf and the mainland on the doorstep.
Madeira suits buyers who want those same Portuguese ownership rules on an Atlantic island with a mild climate, the minimum property-tax rate in every municipality and, for anyone who moves, income-tax rates 30% below the mainland’s. It is the smallest market of the three, which cuts both ways: less choice, and less of the crowd. Our guide to Madeira’s prime areas shows where on the island to look, and our corridor guides for German and British buyers set out the home-country side.
Key takeaways
- On a EUR 2M resale, transfer taxes are about EUR 166,000 in Madeira or the Algarve and about EUR 210,000 in Mallorca (illustrative).
- Portugal’s ownership taxes are lighter: IMI from 0.3%, no general wealth tax, AIMI only above EUR 600,000 of valuation.
- Spain adds deemed-income tax on unlet homes, wealth tax above EUR 700,000 and a solidarity tax above EUR 3M of net wealth.
- On a sale, Spain’s flat 19% can beat Portugal’s progressive charge for a high earner; model it.
- No property visas anywhere: Portugal ended them in 2023, Spain in April 2025.
- For movers, Madeira’s 33.6% top income-tax rate is 30% below the mainland’s 48%, which applies in the Algarve.
Frequently asked questions
Is it cheaper to buy in Madeira or Mallorca?
In transfer tax, Madeira, at prime prices. A non-resident pays about 8.3% in Madeira, while Mallorca’s resale transfer tax rises in bands from 8% to 13%. On a EUR 2M resale that is roughly EUR 166,000 against EUR 210,000 (illustrative).
Do Madeira and the Algarve have the same property taxes?
Mostly. Both follow Portuguese law, and a non-resident pays 7.5% IMT and 0.8% stamp duty in either. Madeira’s IMT brackets are 25% higher than the mainland’s, and every Madeira municipality charges the minimum 0.3% IMI, while Algarve councils set rates between 0.3% and 0.45%.
Which has lower annual taxes, Portugal or Spain?
Generally Portugal, for a non-resident owner. Portugal has no general wealth tax, only AIMI above EUR 600,000 of valuation. Spain taxes deemed income on unlet second homes, applies wealth tax above a EUR 700,000 exempt minimum and a solidarity tax above EUR 3M of net wealth.
How is rental income taxed in each market?
Portugal charges non-residents a flat 25% on residential rent in Madeira and the Algarve. Spain charges 19% on net rent for EU and EEA residents and 24% for others. Holiday-let licensing is local in all three.
Where is capital gains tax lower for a non-resident?
Often Spain, for high earners. Spain charges non-residents a flat 19% on the gain. Portugal taxes half the gain at progressive rates, with worldwide income setting the rate, which can approach a quarter of the gain at the top of the scale.
Can I get residency by buying in Madeira, the Algarve or Mallorca?
No. Portugal removed property from its golden visa on 7 October 2023, and Spain abolished its golden visa with effect from 3 April 2025. Residence depends on your passport and a visa or registration.
Which has lower income tax for residents, Madeira or the Algarve?
Madeira. From 2026 Madeira cuts every national income-tax band by 30%, giving a top rate of 33.6% against 48% on the mainland, including the Algarve.
Which market is easiest to fly to?
Mallorca, by a distance: Palma handled 33.8 million passengers in 2025. Faro, for the Algarve, passed 10 million for the first time, and Madeira reached a record 5.4 million.
Are there restrictions on foreigners buying in Mallorca?
No. A proposal to restrict non-resident purchases was debated and rejected by the Balearic parliament in February 2026, and never became law. Portugal has no restrictions either.
How is inheritance taxed in Portugal and the Balearics?
Lightly for close family in both. Portugal exempts spouses, partners, children and parents from its 10% stamp duty on inherited assets, and the Balearics exempt close relatives from inheritance tax since July 2025. Forced heirship applies in both unless your will chooses your national law.
Which is better value: Madeira or the Algarve?
On official medians, Madeira is lower: EUR 2,863 per square metre against EUR 3,352 in the Algarve in early 2026, according to INE. Medians are not prime prices, so compare specific properties rather than averages.
Sources
- Portal das Finanças – IMT Code, article 17, including the 7.5% non-resident rate added in 2026
- Diário da República – Stamp Duty Code and General Table (0.8% on purchase, 10% on inheritance)
- Portal das Finanças – IMI Code, article 112 (IMI rates)
- Portal das Finanças – IMI Code, article 135-F (AIMI rates)
- Portal das Finanças – IRS Code, article 43 (gains counted at 50%)
- INE – house price statistics at local level, first quarter of 2026 (released 17 July 2026)
- VINCI Airports – annual traffic to 31 December 2025, including Faro and Madeira
- Aena – Palma de Mallorca airport traffic 2025
- Agencia Tributaria – non-resident income tax, wealth tax and the solidarity tax on large fortunes
- Agència Tributària de les Illes Balears – Balearic transfer tax bands and inheritance tax
- BOE – Organic Law 1/2025 (end of Spain’s golden visa)
Figures current at October 2026. Portuguese and Spanish property taxes change most years; confirm the position for your purchase with lawyers and tax advisers in the relevant country.
About the author
Alexander Thornbury is a published author who writes on international property, tax and residency for high-net-worth buyers across Europe. His work focuses on the practical mechanics of cross-border purchase: what a buyer actually pays, owes and signs. More at alexanderthornbury.com.