Wealth tax in the Balearic Islands is one of the taxes that most surprises owners of high-value property in Mallorca, particularly those who come from countries where no comparable tax exists. Alongside it, Spain introduced a state solidarity tax on large fortunes which may also apply to the same taxpayers. Raso Investments reviews the position of resident and non-resident property owners, prepares the returns where they are due and analyses the planning options available within the law.
Both taxes are levied annually on the taxpayer’s net worth at a given date. The rules that determine who is liable, which assets are included, how they are valued and what rates and allowances apply depend on the taxpayer’s residence and, in several respects, on the regulations of the Balearic Islands in force for each year. For that reason, this page explains the general framework without quoting thresholds or rates, which are reviewed case by case.
How wealth tax in the Balearic Islands works
Wealth tax (Impuesto sobre el Patrimonio) is a state tax whose management and many of whose rules are assigned to the autonomous communities. The Balearic Islands applies it with its own allowance and scale.
- Residents in Spain are taxed on their worldwide net assets, whatever their location.
- Non-residents are taxed only on assets located in Spain or rights that can be exercised in Spain, such as property in Mallorca, Spanish bank accounts or shares in Spanish companies.
- Non-residents can generally apply the regional rules of the autonomous community where most of the value of their Spanish assets is located, which for many owners of property in Mallorca means the Balearic rules.
Debts may be deducted when they relate to taxable assets, for example a mortgage used to acquire the Spanish property. Certain exemptions exist, such as the main home of residents up to a limit, and some business assets and shareholdings, subject to strict requirements.
Valuation of property
For wealth tax purposes, real estate is generally valued at the highest of three figures: the cadastral value, the value determined or verified by the authorities for other taxes, and the acquisition price. In practice, for recently acquired villas in Mallorca, the purchase price is often the relevant figure. Properties held through companies are reflected in the value of the shares, with specific rules for companies whose assets are mainly real estate.
The solidarity tax on large fortunes
The temporary solidarity tax on large fortunes (Impuesto Temporal de Solidaridad de las Grandes Fortunas) is a state tax created in 2022 and applied to taxpayers with very high net worth. It largely follows the rules of wealth tax as to residence, assets and valuation, and the wealth tax actually paid in the autonomous community is deducted from it, so that the solidarity tax operates as a complement. It was introduced as a temporary measure and has since been extended; whether and how it applies for a given year depends on the legislation in force for that year.
What we review
- Your tax residence and, for non-residents, the location of your Spanish assets.
- The applicable valuation of each property and of other Spanish assets.
- Debts that may be deducted and exemptions that may apply.
- The interaction between wealth tax, the solidarity tax and income tax, including any limits on the combined burden for residents.
- The effect of the holding structure, for example ownership through a company, explained on our page on buying property in Spain through a company.
How we work
We begin with an inventory of the assets and debts as at the relevant date and an analysis of residence. We then calculate whether any return is due, prepare and file the returns, and advise on lawful planning options for future years, such as the financing of acquisitions, the timing of transactions or the structure of ownership. Planning is always considered together with inheritance and income tax, because measures that reduce one tax may increase another. Our page on inheritance and gift tax for foreigners covers the related succession issues.
Common mistakes
- Assuming that non-residents are never liable for wealth tax.
- Valuing property at the cadastral value when the acquisition price is higher.
- Forgetting that a filing obligation may exist even where no tax is ultimately payable, depending on the value of the assets.
- Making changes in the holding structure without assessing their effect on other taxes.
- Moving to Spain without anticipating that worldwide assets will become taxable; see our page on tax residency and moving to Spain.
Families should also consider how wealth tax interacts with succession planning. Lifetime gifts of property, the separation of usufruct and bare ownership, or the use of a company can change the net worth of each family member, but they also have consequences for gift tax, inheritance tax and income tax. We assess these options as a whole, comparing the effect over several years rather than only in the year of the change, and we document each step properly so that it can be justified if reviewed by the authorities.
Frequently asked questions
Do I have to pay wealth tax if I am not resident in Spain?
Possibly, if the net value of your assets located in Spain exceeds the applicable allowance. Each case must be calculated individually.
Is the mortgage on my villa deductible?
Generally, debts used to acquire a taxable asset can be deducted, subject to the rules in force and to adequate evidence.
Does the solidarity tax mean I pay twice?
No. The wealth tax paid is deducted from the solidarity tax, which applies only to the extent that it exceeds the regional wealth tax.
When are these taxes filed?
They are filed annually by reference to net worth at a specific date, usually in the same period as the income tax campaign. We confirm the applicable deadlines each year.
Next steps
If you own property in the Balearic Islands and want to know your wealth tax position, write to info@raso.law. Describe the property and your situation: the properties owned, how they are held, any related debts and your country of tax residence. We will review your case individually and reply in writing. See also our page on advisory, investment and wealth management.