Property investment in Mallorca attracts international capital because of the island’s stable demand, limited supply and appeal to both residents and visitors. Those same characteristics explain why the legal framework is demanding: planning rules are strict, tourist letting is tightly regulated and the tax consequences of holding and selling property can be substantial. Raso Investments advises private investors and family offices on the full life cycle of an investment in Mallorca, from the choice of structure to the eventual sale or transfer to the next generation.
This page gives an overview of the main legal and tax elements an investor should consider. Each of them is developed in more detail on the linked pages, and each investment is reviewed individually.
The legal framework for property investment in Mallorca
Ownership of real estate in Spain is evidenced and protected by registration in the Land Registry, which gives strong protection to buyers who acquire in good faith from the registered owner. The Cadastre, which is a tax register, describes the property for valuation purposes but does not determine ownership. Investors should ensure that both records are consistent with reality before buying.
Planning law is shared between the Balearic Government, the Consell de Mallorca and each municipality. Land classification determines what can be built and used. Rustic land is subject to strict limits, and many properties in the countryside have a planning history that must be examined carefully. Our page on buying property in Mallorca explains how we approach that review, including the additional checks needed for villas and country estates.
Rental strategies and their legal regimes
An investment’s return depends on how the property can lawfully be let. Three regimes should be distinguished:
- Tourist rentals. Short stays offered to tourists require prior registration with the island authorities and compliance with technical requirements and limits on tourist places. New registrations have been heavily restricted, particularly in apartment buildings. See our page on the holiday rental licence (ETV).
- Residential tenancies. Lettings of a home to be used as the tenant’s permanent residence are governed by the Urban Leases Act, which grants tenants significant protection, including minimum durations and limits on certain terms. Housing legislation has also introduced specific rules in areas declared as stressed housing markets.
- Seasonal and other lettings. Lettings for a temporary purpose, such as work or study, follow a different regime. Their classification depends on the actual purpose and must be properly documented.
Choosing the wrong regime, or using a contract that does not reflect the real nature of the letting, can lead to sanctions or to a tenancy with far more protection for the occupier than the investor intended.
Structuring the investment
Investors can hold property personally, jointly, or through a Spanish or foreign company. The right structure depends on the investor’s residence, the intended use, the size of the portfolio and the exit strategy. Holding through a company may suit a professional rental business but is rarely the best option for a family holiday home. We analyse the alternatives on our page on buying property in Spain through a company. Investors with wider portfolios may also find our page on advisory, investment and wealth management relevant.
Taxes over the life of the investment
The tax analysis of an investment in Mallorca should cover four moments:
- Acquisition. Transfer tax on resale properties, or VAT and stamp duty on new builds, together with notary and registry costs.
- Ownership. Local property tax (IBI), non-resident income tax for non-resident owners, and, depending on the owner’s net worth, wealth tax and the solidarity tax on large fortunes.
- Income. Rental income is taxable in Spain, with different rules for residents and non-residents, and for individuals and companies.
- Exit. The sale triggers tax on any capital gain and the municipal plusvalía, and transfers on death or by gift are subject to inheritance and gift tax.
Rates, thresholds and reliefs depend on the investor’s profile and on the regulations in force at each moment, and several are set by the Balearic Islands. We do not rely on general figures; every case is reviewed individually. See also our page on capital gains tax on property in Spain.
How we work
We begin by understanding the investor’s objectives, residence and existing assets. We then review the specific property or properties, propose a structure, coordinate with tax advisers in other jurisdictions where needed, and handle the acquisition. Once the investment is in place, we can assist with tenancy agreements, tax compliance for non-residents, disputes and, when the time comes, the sale or the succession planning.
Common mistakes
- Calculating returns on the assumption that a tourist rental registration can be obtained after the purchase.
- Ignoring the cost of legalising unauthorised works or the impossibility of doing so.
- Choosing a holding structure without considering the eventual sale or inheritance.
- Underestimating annual compliance obligations for non-resident owners.
- Signing residential tenancies on templates that do not reflect current legislation.
Many of these mistakes have the same root: decisions taken on the basis of assumptions rather than documents. A short written review before committing to a purchase usually costs far less than correcting a problem afterwards. We therefore encourage investors to share the available documentation at an early stage, even before a price has been agreed, so that the legal feasibility of the investment can be confirmed first.
Frequently asked questions
Is Mallorca open to foreign investors?
Yes. Foreign individuals and companies can generally acquire property in Mallorca on the same terms as Spanish nationals, subject to specific authorisations in limited areas and to anti-money laundering checks.
Which rental regime gives the best return?
It depends on the property, its location and the licences available. The legal feasibility of each option must be confirmed before the investment decision.
Should I invest personally or through a company?
There is no universal answer. We compare the scenarios based on your residence, objectives and expected holding period.
Do I need to be resident in Spain to invest?
No. Non-residents can invest, but they have their own tax obligations, including annual non-resident income tax returns.
Next steps
If you are planning a property investment in Mallorca, write to info@raso.law describing the transaction and the property or type of property you are considering, the intended use, the approximate budget and your country of tax residence. We will review your case individually and reply in writing.