Buyer Resources

Purchasing and owning property in Spain involves several taxes that buyers must understand. This comprehensive guide breaks down every tax you'll encounter when buying a villa in Calvià, Mallorca.

1. Purchase Taxes (One-Time)

Property Transfer Tax (ITP - Impuesto sobre Transmisiones Patrimoniales)

Applies to second-hand properties (resale properties).

Property Value	Tax Rate in Balearic Islands	Example (€3M Villa)
Up to €400,000	8%	—
€400,001 - €600,000	9%	—
€600,001 - €1,000,000	10%	—
Over €1,000,000	11%	€330,000

VAT (IVA - Impuesto sobre el Valor Añadido)

Applies to new-build properties (first sale from developer).

• Standard Rate: 10% on the property value
• Plus Stamp Duty (AJD): Additional 1.5% in Balearic Islands
• Total for New Builds: 11.5%

Example: A new €3M villa = €300,000 VAT + €45,000 stamp duty = €345,000 total

2. Annual Property Taxes (Ongoing)

Property Tax (IBI - Impuesto sobre Bienes Inmuebles)

Annual municipal tax based on cadastral value (valor catastral), which is typically 50-70% of market value.

Municipality	IBI Rate	Example (€3M Villa)
Calvià	0.4% - 0.6%	€6,000 - €9,000/year

When paid: Annual payment, usually in summer (June-October)

Wealth Tax (Impuesto sobre el Patrimonio)

For residents of Spain with worldwide assets exceeding threshold.

• Tax-free allowance: €700,000 in Balearic Islands
• Rates: Progressive from 0.28% to 3.45%
• Primary residence exemption: Up to €300,000
• Non-residents: Only taxed on Spanish assets

Non-Resident Income Tax (IRNR)

If you don't live in Spain full-time but own property there.

• Rate: 19% (EU residents) or 24% (non-EU)
• Applied to: 1.1% - 2% of cadastral value as "deemed income"
• Example: €3M villa with €1.8M cadastral value = €36,000 deemed income × 19% = €6,840/year

3. Rental Income Taxes

If You Rent Out Your Villa:

Residents:

• Rental income taxed at progressive rates: 19% - 47%
• Deductions allowed: maintenance, IBI, community fees, mortgage interest
• Long-term rentals: 60% reduction on net income

Non-Residents:

• EU residents: 19% flat rate on gross rental income
• Non-EU residents: 24% flat rate
• Expenses can be deducted if properly documented
• Quarterly payments: Due within 20 days of each quarter end

Tourist Rental Tax (Ecotasa)

• Rate: €2 - €4 per person per night (depending on season and property type)
• Maximum: 8 nights per stay
• Who pays: Guests, but owners are responsible for collection and payment

4. Selling Taxes (Capital Gains)

Capital Gains Tax (CGT)

When you sell your property at a profit.

Residents:

• Progressive rates: 19% - 28%
• Exemptions for reinvestment if over 65 or primary residence sale

Non-Residents:

• EU residents: 19% flat rate
• Non-EU residents: 24% flat rate
• No exemptions available

Example: Buy at €3M, sell at €3.6M = €600k gain × 19% = €114,000 CGT

Municipal Capital Gains Tax (Plusvalía Municipal)

Tax on increase in land value during ownership.

• Based on cadastral land value (not sale price)
• Rates vary by municipality and length of ownership
• Typical range in Calvià: €2,000 - €15,000 for luxury villas
• Important: Can be challenged if land value hasn't increased

Retention Tax (3% Withholding)

• Buyer withholds 3% of purchase price
• Paid to tax authorities on seller's behalf
• Seller can reclaim if CGT liability is lower
• Example: €3M sale = €90,000 withheld

5. Additional Purchase Costs

Cost Item	Typical Amount	Notes
Notary Fees	€600 - €1,500	Fixed by law, varies by property value
Land Registry	€400 - €1,000	To register property in your name
Legal Fees	1% + VAT	For lawyer representation (€30k on €3M villa)
Bank Fees (if mortgage)	1% - 2%	Opening fee, valuation, insurance
NIE Application	€10 - €50	Foreigner tax ID number (required)

Total Cost Summary

Tax Planning Strategies

1. Structure Ownership Wisely

• Consider purchasing through a Spanish company for properties over €3M
• Can reduce wealth tax exposure and simplify succession
• Must weigh against annual corporate costs and complexity

2. Establish Tax Residency Status Early

• Spending 183+ days/year in Spain makes you tax resident
• Residents have different (sometimes favorable) tax treatments
• But are taxed on worldwide income

3. Keep Meticulous Records

• Document all improvements (adds to cost basis, reduces CGT)
• Keep receipts for rental expenses (deductible)
• Maintain purchase receipts for furniture (can be depreciated)

4. Use Double Taxation Treaties

• Spain has treaties with 90+ countries
• May prevent paying tax twice on same income
• Consult international tax advisor for your home country

Key Takeaways

This guide is for informational purposes only and does not constitute tax or legal advice. Tax regulations change frequently and vary based on individual circumstances. Always consult with a qualified Spanish tax advisor and lawyer before making property purchase decisions.