Owning a Property in Mallorca​

Costs of Owning a Property

by Mark Stücklin

Owning a property in Mallorca is associated with a number of costs in the form of taxes and fees. Some of these are maintenance costs, such as cleaning, repairing, reforming, utility bills, rubbish collection, and so on. These will be determined by the size and type of property you buy. Obviously a large villa with a garden and pool will require much more effort and costs to maintain than a small apartment. 

General Maintenance and Cleaning 

For cleaning and maintenance, a figure of 14 – 16 Euros an hour, excluding VAT, is fairly typical throughout Mallorca.

Property Ownership Tax (Impuesto Sobre Bienes Inmuebles – IBI)

A local tax on the ownership of property in Mallorca, irrespective of whether the owner is a resident or not. Calculated on the basis of the cadastral value, Valor Catastral, (an administrative value that is usually lower than the market value, sometimes considerably so) set by the town hall the tax rate goes from 0.4% – 1.1% of the valor catastral depending on the Spanish region.

Annual Wealth Tax (Impuesto Sobre Patrimonio)

This tax has been changed several times in recent years. 

Residents and non-residents are entitled to the following deductions per person:
– Individual deduction: €700,000 (previously €108,182.18 for residents, €0 for non-residents). Note that in Catalonia the deduction is €500,000.

Residents are also entitled per person to:
– Main home / permanent dwelling deduction: €300,000 (previously €150,253.03 for residents, €0 for non-residents)
Non-residents, by definition, cannot benefit from a permanent dwelling deduction. A married couple would each be entitled to the individual deduction as well as the deduction on their share of the main home owned in joint names (residents only). So, for example, a married couple, resident and non-resident alike, has a combined tax-free allowance of €1,400,000 on their net estate. Taking into account the main home, a resident married couple has a total tax free allowance of €2,000,000. Also, note that this tax is on net assets, which means you can deduct mortgage debts (residents and non-residents alike).

The wealth tax follows a progressive sliding scale from 0.2% over 700,000 Euros, the larger the estate, the more you are taxed, with a cap set at 2,5pc for estates in excess of €10,7m.

Personal Income Tax (Impuesto sobre la Renta de No Residentes – IRNR)

Non-residents who own property in Spain have to pay an annual income tax that varies according to whether the property is rented out or not.

Not rented out

Non-resident property owners, who do not rent out their property and who do not have any other source of income in Spain, pay income tax based on the value of their property. The tax rate is fixed as 25% of 2% of the Valor Catastral of the property.

The tax on a property with a Valor Catastral of 700,000 Euros would be as follows:
Property value for tax purposes = 700,000 Euros
Taxable base (2%) = 14,000 Euros
Tax (25%) = 3,500 Euros

Rented out

If non-residents rent out their property and receive an income in exchange, they are obliged by law to declare this income and pay taxes on it. The taxable base and the tax rate will be determined by the laws as they apply to each person’s particular circumstances (taking into account the double taxation treaty – if any – between Spain and the country of origin of the non- resident). In many cases, non-residents simply pay a flat rate of 25% of the gross income they earn from their property in Spain.

Residents in Spain will have to pay the income tax based on their income earned during the year. The tax rate depends on the level of income.

Community Fees

Owners of property that is part of any development, building, or complex in which common zones are shared with other owners are by law obliged to be members of the community of owners, known as the Comunidad de Propietarios. This will entail paying community fees for the upkeep of the common areas, and any other services that the community vote for. The fees will vary according to the magnitude of the common areas, the costs of maintaining them, and the services that the community vote for. A budget for annual community expenses is approved by a majority vote of all owners (or representatives) who are present at the annual general meeting of the Comunidad de Propietarios.

Insurance

Household insurance will vary according to the circumstances of the owner and the type of property. However, it should be borne in mind as a cost that all property owners will face.

This article is a part of the Comprehensive Guide to Buying Property in Mallorca that includes all information from buying a property in Mallorca to hiring a independent lawyer/ solicitor. 

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