Whether as a second home or an investment property for rental – non-residents in the Balearic Islands are required to file income tax returns.
A holiday property in Mallorca can be a valuable investment not only financially but also emotionally. However, those who have their main residence in Germany, for example, and own property in the Balearic Islands must fulfill certain tax obligations. Depending on how the property is used, different income tax returns are required – even if no rental income is generated.
Taxation is carried out in accordance with the Spanish Income Tax Law for Non-Residents (Impuesto sobre la Renta de no Residentes – IRNR).
Two essential points should be noted:
- Own tax regulations: Spain has a special law for taxing non-residents, which differs from the regulations in many other countries.
- Self-assessment: In Spain, taxes must be calculated and paid independently. Unlike in Germany, there is no tax assessment notice. Whether the information is correct is only determined during a possible audit.
Different tax regulations apply depending on how the property is used. The following focuses on self-use.
Those who fulfill their dream of owning a home in Mallorca but have their permanent residence outside Spain must deal with the Spanish self-use tax. This tax is similar to a second home levy.
Basic principle of self-use tax:
In Spain, the mere availability of a property is taxed. This means that every second home is automatically subject to self-use taxation – regardless of whether you use the property or not. This regulation applies to both residents and non-residents, with the latter having to submit a separate tax return for each property.
Calculation of the tax:
The tax is calculated based on the cadastral value of the property, which is determined by the municipality and should not be confused with the market value. A fictitious income is determined based on this cadastral value. Depending on when the cadastral value was last updated, this fictitious income is 1.1% or 2% of the cadastral value. EU citizens pay 19% tax on this income, while non-EU citizens pay 24%. An example: With a cadastral value of 200,000 euros and an assessment of 2%, the tax burden would be about 760 euros per year at a tax rate of 19%.
When is the tax due?
The tax becomes due from the moment the property is habitable – regardless of whether it is actually used. For new buildings, this applies from the time of acceptance. For renovations, it depends on whether the property remains habitable during the work. Extensive renovations should be documented to prove possible uninhabitability. The tax return (“Modelo 210”) must be submitted by the end of the following year.