Tax Guide for Property Owners in Mallorca: What Foreigners Need to Know

Owning property in Mallorca is a dream for many British and international buyers, but the Spanish tax system can be a rude awakening if you are not prepared. From annual declarations on empty properties to wealth tax thresholds and post-Brexit changes to non-resident tax rates, there is quite a lot to get your head around.

This comprehensive guide explains every tax obligation you are likely to face as a foreign property owner in Mallorca, whether you live in the property, rent it out, or leave it sitting empty between visits. All figures are accurate for the 2025-2026 tax year.

Non-Resident Income Tax (IRNR) -- Even If You Don't Rent It Out

This is the one that catches most foreign owners off guard. If you own property in Spain and are not a Spanish tax resident, you are liable for non-resident income tax (Impuesto sobre la Renta de No Residentes, or IRNR) even if the property generates no rental income whatsoever.

Imputed Rental Income on Empty Properties

Spain applies a concept called imputacion de rentas inmobiliarias -- essentially, the tax authorities assume that your property could generate rental income, and they tax you on that hypothetical amount.

The calculation works as follows:

• Take the valor catastral (cadastral value) of the property. You can find this on your IBI bill.
• Apply a rate of 2% (or 1.1% if the cadastral value was revised in the last 10 years).
• The result is your imputed income.
• Apply the non-resident tax rate to that figure.

Post-Brexit tax rates for imputed income:

Residence	Tax Rate
EU/EEA residents (e.g., Ireland, Germany)	19%
Non-EU residents (e.g., UK post-Brexit, USA)	24%

Example: A property in Palma with a cadastral value of 200,000 euros (revised within the last 10 years) would have imputed income of 200,000 x 1.1% = 2,200 euros. A UK resident would pay 2,200 x 24% = 528 euros per year. An Irish resident would pay 2,200 x 19% = 418 euros.

This tax is declared annually using Modelo 210, and must be filed by 31 December of the year following the tax year.

Rental Income Tax for Non-Residents

If you rent out your Mallorca property -- whether as a long-term let or a holiday rental -- the income is subject to non-resident income tax at the following rates:

Residence	Tax Rate	Can Deduct Expenses?
EU/EEA residents	19%	Yes -- proportional expenses
Non-EU residents (incl. UK)	24%	No -- gross income taxed

This is one of the most significant post-Brexit changes for British property owners. As an EU resident, you could deduct legitimate expenses (mortgage interest, management fees, repairs, insurance, community charges, IBI, depreciation) from your rental income before applying the 19% rate. As a non-EU resident, you are taxed on the gross rental income at 24%, with no deductible expenses.

The practical impact can be substantial. Consider a property generating 30,000 euros in annual rental income with 12,000 euros in allowable expenses:

Scenario	Tax Calculation	Tax Due
EU resident (pre-Brexit rules for UK)	(30,000 - 12,000) x 19%	3,420 euros
UK resident (post-Brexit)	30,000 x 24%	7,200 euros

That is more than double the tax liability. If you are a UK resident renting out property in Mallorca, careful tax planning with a qualified fiscal adviser is essential.

Rental income is declared quarterly using Modelo 210, within 20 days of the end of each quarter (April, July, October, January).

Important: Holiday rental licences (licencia turistica) are heavily regulated in the Balearic Islands. Before renting to tourists, ensure your property has the required licence. Fines for unlicensed rentals in Mallorca can reach 40,000 euros.

IBI -- The Spanish Council Tax

The IBI (Impuesto sobre Bienes Inmuebles) is a municipal property tax, roughly equivalent to UK council tax. It is charged annually by the local ayuntamiento (town hall) based on the cadastral value of the property.

IBI rates vary by municipality but typically fall between 0.4% and 1.1% of the cadastral value. In practice, annual IBI bills in Mallorca tend to range from:

• Apartment in Palma: 400-1,200 euros/year
• Villa in the southwest (Calvia, Andratx): 800-3,000 euros/year
• Finca/country house: 300-1,500 euros/year (cadastral values tend to be lower for rural properties)

IBI is usually paid between September and November, though dates vary by municipality. Most owners set up a direct debit (domiciliacion bancaria) with their Spanish bank to avoid missing the payment window. Late payment incurs surcharges of 5-20% depending on the delay.

Wealth Tax (Impuesto sobre el Patrimonio)

Spain levies a wealth tax on the net value of assets held in Spain by non-residents. The Balearic Islands have their own regional rates, which are among the highest in Spain.

How It Works for Non-Residents

• Only assets located in Spain are counted (your UK assets are excluded)
• There is a 700,000-euro exemption per person on Spanish assets
• Non-residents do not get the additional 300,000-euro primary residence exemption (that only applies to Spanish residents)
• The tax applies to the net value above the exemption threshold

Balearic Islands Wealth Tax Rates (2025-2026)

Taxable Base (euros)	Rate
Up to 170,472	0.28%
170,472 - 340,945	0.41%
340,945 - 681,891	0.69%
681,891 - 1,363,783	1.24%
1,363,783 - 2,727,566	1.79%
2,727,566 - 5,455,133	2.35%
Over 5,455,133	3.45%

Example: A non-resident who owns a property in Mallorca valued at 1,200,000 euros (with no mortgage or debts against it) would have a taxable base of 1,200,000 - 700,000 = 500,000 euros. The wealth tax on this amount would be approximately 1,640 euros per year.

For couples who own property jointly, each partner benefits from the 700,000-euro exemption individually, meaning a jointly-owned property worth up to 1,400,000 euros would fall below the threshold entirely.

Wealth tax is declared using Modelo 714, filed between April and June each year alongside the income tax declaration.

Note: Spain also introduced the Impuesto Temporal de Solidaridad de las Grandes Fortunas (Solidarity Tax) for net wealth exceeding 3 million euros. This is a state-level tax that applies on top of the regional wealth tax in certain circumstances. Most property owners in Mallorca will not be affected unless their total Spanish assets are very substantial.

Capital Gains Tax on Property Sales

When you sell a property in Spain, you are liable for capital gains tax on the profit. For non-residents, the rate is:

• EU/EEA residents: 19%
• Non-EU residents (incl. UK post-Brexit): 19% (capital gains are taxed at a flat 19% for all non-residents regardless of origin)

The gain is calculated as the difference between the acquisition value (purchase price plus costs such as notary fees, taxes paid on purchase, and documented improvements) and the transfer value (selling price minus selling costs such as estate agent commission and plusvalia tax).

The 3% Retention for Non-Resident Sellers

This is an important mechanism that often surprises foreign sellers. When a non-resident sells property in Spain, the buyer is legally obliged to withhold 3% of the sale price and pay it directly to the Spanish tax authorities (Agencia Tributaria) on the seller's behalf.

This 3% retention is not an additional tax -- it is an advance payment towards your capital gains tax liability. If your actual tax liability is less than 3%, you can claim a refund by filing Modelo 210 within three months of the sale. If your liability exceeds 3%, you must pay the difference.

Example: You sell a property for 500,000 euros. The buyer withholds 15,000 euros (3%) and pays it to Hacienda. Your actual capital gain is 80,000 euros, so your tax at 19% is 15,200 euros. Since 15,000 euros has already been paid, you owe the remaining 200 euros.

Plusvalia Municipal (Local Capital Gains Tax)

In addition to national capital gains tax, sellers must pay plusvalia municipal (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana). This is a municipal tax on the increase in land value during the period of ownership.

Since a 2021 Constitutional Court ruling, the calculation has been reformed. There are now two methods, and the taxpayer can choose whichever results in a lower amount:

• Objective method: Based on the cadastral land value multiplied by coefficients set by the municipality, depending on years of ownership
• Real method: Based on the actual gain, with the proportion attributable to land calculated from the cadastral breakdown

If you sell at a loss (no actual gain), you are not liable for plusvalia.

The UK-Spain Double Taxation Treaty

The UK and Spain have a double taxation agreement (DTA) that prevents you from being taxed twice on the same income. Key points for property owners:

• Property income (rental income and capital gains from property) can be taxed in both countries, but the UK will grant a tax credit for Spanish tax paid, so you only pay the difference if UK rates are higher
• Imputed income tax: This Spanish-specific concept may not be creditable against UK tax -- consult your accountant
• Wealth tax: The UK does not have an equivalent tax, and relief under the DTA is limited
• The DTA was not affected by Brexit -- it is a bilateral treaty between the two countries and remains in force

You must report your Spanish property income on your UK self-assessment tax return. HMRC allows you to claim a foreign tax credit for Spanish taxes paid, reducing your UK liability accordingly.

Modelo 210: Your Annual Declaration

Modelo 210 is the tax form that non-resident property owners must file with the Spanish tax authorities. You may need to file it multiple times per year depending on your circumstances:

• Imputed income (empty property): Filed annually, by 31 December of the following year
• Rental income: Filed quarterly, within 20 days of each quarter end
• Capital gains on sale: Filed within 3 months of the sale date (to claim back any excess from the 3% retention)

The form is filed electronically through the Agencia Tributaria website, or your fiscal representative can file it on your behalf.

Hiring a Fiscal Representative (Asesor Fiscal)

Given the complexity of Spanish tax obligations -- and the penalties for non-compliance -- we strongly recommend that all foreign property owners in Mallorca hire a qualified asesor fiscal (fiscal adviser or tax consultant).

A good fiscal representative will:

• File your Modelo 210 declarations on time
• Calculate and pay your IBI, wealth tax, and IRNR
• Advise on tax-efficient ownership structures (personal vs. company ownership)
• Handle the 3% retention process if you sell
• Coordinate with your UK accountant on double taxation relief
• Represent you before the Spanish tax authorities

Expect to pay between 300 and 800 euros per year for ongoing tax compliance services. For rental properties with quarterly filings, costs may be slightly higher. This is a small price compared to the penalties for late or incorrect declarations, which start at 100 euros per declaration and can escalate to 150% of the tax due in cases of deliberate avoidance.

Post-Brexit Summary: Key Tax Changes for UK Nationals

Since the end of the Brexit transition period on 31 December 2020, British property owners in Mallorca are affected in the following ways:

Tax	Before Brexit	After Brexit
Imputed income rate	19%	24%
Rental income rate	19% (with expense deductions)	24% (no expense deductions)
Capital gains rate	19%	19% (unchanged)
Wealth tax	No change	No change
Double taxation treaty	In force	Still in force

The rental income change is by far the most impactful. If you are a UK resident renting out property in Mallorca, review your tax position with a qualified adviser who understands both Spanish and UK tax law.

Don't Let Tax Obligations Catch You Out

The Spanish tax system is thorough, and the authorities are increasingly effective at identifying non-compliant foreign property owners. Automatic information exchange between Spain and the UK (under the Common Reporting Standard) means that HMRC and the Agencia Tributaria share financial data, making it harder than ever to fly under the radar.

The best approach is simple: understand your obligations, hire a competent fiscal adviser, and keep on top of your declarations. The costs are modest, and the peace of mind is considerable.