Tax Essentials for Foreign Owners of Mallorca Vacation Homes

Sep 30, 2024

If you are a non-resident in Spain and have invested in a holiday property in Mallorca, it is important to be aware of your tax obligations. Whether you use the property exclusively as a second home or rent it out to generate income, the tax authorities have specific requirements you must meet.

In this article, we explain the key points about taxes for non-residents in the Balearic Islands, based on Spain’s Non-Resident Income Tax Law (IRNR).

Personal Use of the Property

If you use the property only for personal use and do not rent it out, you will be subject to the imputed income tax. In Spain, simply having a second home available creates a tax obligation.

1. How it’s calculated: The tax is based on the cadastral value of the property, not its market value. From this value, a deemed income is calculated, usually between 1.1% and 2%.
2. Applicable rates: For EU citizens, the tax rate is 19%, while for non-EU residents it rises to 24%. For example, if your property has a cadastral value of €200,000, the tax would be approximately €760 annually (assuming a 2% base and 19% tax rate).
3. When to pay: This tax applies as soon as the property is habitable, regardless of its actual use, and you must file the Form 210 annually.

Vacation Rentals: Key Differences

If you decide to rent out your Mallorca property as a vacation rental, the tax obligations vary depending on the services you offer:

1. Rentals with VAT-applicable services: If you provide additional services such as regular cleaning or linen changes, the rental is subject to 10% VAT. Additionally, income will be subject to a 25% corporate tax.
2. Rentals without VAT obligations: If you don’t provide these services, you are exempt from VAT and only pay a 19% income tax on net earnings (24% for non-EU citizens). Note that during periods when the property is not rented, the imputed income tax applies again.

In both cases, it is crucial to keep strict control over tax obligations by submitting the appropriate returns, such as Form 210 or Form 303, as applicable.

Stay Compliant with Your Tax Responsibilities

If you own a holiday home in Mallorca, make sure your taxes are up to date to avoid penalties. Taxation in Spain for non-residents has important specifics that can impact your finances.

For personalized advice, we recommend consulting an expert in international taxation. This information has been provided by Plattes Group, tax advisors specialized in non-residents. Don’t hesitate to seek their professional guidance to properly meet your obligations!