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Mallorca Property: Cost of Ownership

T are two local property taxes which are both based on the property's theoretical rental value according to the local land registry, and is adjusted in line with inflation. The rates of tax will vary from region to region due to the varying rates of tax imposed by the regional and local governments.

Rates (Impuesto Sobre Bienes Inmuebles [IBI])

This is the main local property tax affecting owners of properties in Spain payable yearly to the Town Hall. The amount of the tax is calculated by reference to the “valor catastral” (official value of the property) registered in respect of all properties in Spain. The percentage charged varies from area to area, and is roughly 0.5% to 1%.

Local mains drainage and refuse collection tax (Basura y Alcantarillado)

This local tax payable by property owner and a related to rubbish collection and drainage. The amount to pay varies from area to area, and should be paid to the local Town Hall every 3 or 6 months.

Personal Taxes

As a non-resident property owner in Spain, you may be liable for income tax, value added tax wealth tax, capital gains tax and inheritance tax. Individual situations vary considerably and it is best to seek specialist advice from a tax consultant who has knowledge of the Spanish tax system.

Income Tax (Impuesto sobre la Renta de las Personas Fisicas [IRPF])

The income derived on property in Spain should be declared in Spain. If you sell your Spanish property within one year of purchasing it, then the profit you make is considered an income and not a capital gain, and you would have to pay Spanish income tax on any profit made. If you rent out your Spanish property, then you have a "rental income" from the Spanish property and will have to pay Spanish income tax. 

The rates of income tax payable by a resident and non-resident is different. An individual is considered a Spanish resident if they spend more than 183 days within a year in Spain. A non-resident is taxed at the standard rate of corporate tax at 35%. A resident is taxed in accordance to a sliding scale shown in the table below (correct for 2005).