Buying property in the Balearic Islands: taxes and duties you need to know in 2026

Purchasing a property in the Balearic Islands — whether in Mallorca, Ibiza, Menorca or the small and highly sought-after Formentera — is a decision that requires careful tax planning. The Spanish tax system imposes a range of mandatory levies at the time of purchase, others payable on an annual basis, and further taxes triggered by any rental income or future resale. This guide breaks down each item in detail, with reference tables and practical calculations, to help you understand exactly what the full cost of your transaction will be.

Buyers in Formentera specifically should bear in mind that the island falls within the Autonomous Community of the Balearic Islands and is therefore subject to the same regional tax framework that applies across the entire archipelago. There are no special fiscal regimes comparable to those of the Canary Islands: taxation follows standard Balearic rules, as described below.

Taxes at the time of purchase

The initial tax burden depends primarily on one fundamental variable: are you buying a new-build property (first sale by the developer) or a resale property (sold by a private individual or any party other than the original constructor)? The two scenarios activate entirely separate and mutually exclusive tax regimes.

Resale property: ITP (Impuesto sobre Transmisiones Patrimoniales)

The ITP is the regional transfer tax that applies every time a resale property changes hands. In the Balearic Islands the rates are progressive and calculated in brackets on the purchase price declared in the notarial deed, or on the official cadastral reference value if that figure is higher. Since 2022, the Spanish Tax Agency has used the cadastral “valor de referencia” as the minimum taxable base: if the agreed price is lower than that value, the tax is still calculated on the cadastral figure.

The ITP must be paid within 30 days of signing the notarial deed, using Form 600 submitted to the Balearic Islands Tax Agency (ATIB). The tax falls exclusively on the buyer.

Reduced ITP rates: who can benefit

Balearic legislation provides significant reductions for specific categories of buyers, particularly in relation to primary residences and certain income or age thresholds.

It is worth noting that these reliefs are rarely applicable to the vast majority of purchases in Formentera, where market prices generally exceed the €270,000 threshold even for mid-sized properties. Their practical relevance is limited mainly to local residents buying their first home within the archipelago.

New-build property: VAT and AJD

When purchasing directly from a developer, the ITP does not apply. Instead, two separate taxes are levied simultaneously.

The Formentera market has very few new-build properties due to the island’s strict urban planning restrictions. The overwhelming majority of purchases therefore involve existing stock, making the ITP the clearly dominant tax regime. The 10% VAT applies in the rare cases of newly built villas developed by local promoters with recent planning permission.

Practical calculation: how much ITP to expect in Formentera

To make the bracket system more concrete, here are three calculations based on representative market values for Formentera.

As the figures show, the real effective rate is always lower than the headline rate of the highest applicable bracket, thanks to the progressive mechanism. Nevertheless, on high-value properties — the norm in Formentera — the ITP represents a very substantial cost that must be factored in well before signing the preliminary contract.

Notary and land registry fees

On top of the taxes themselves, the purchase requires payment of notary fees and land registry registration costs. These are not fixed amounts but vary according to the property value and the complexity of the deed. As a general guideline, for transactions between €500,000 and €1,500,000 it is reasonable to budget an additional 0.1% to 0.5% of the purchase price. On top of this come the fees of the lawyer or gestoria handling the transaction, which typically range from 1% to 1.5% of the purchase price.

The practical rule: how much to set aside

Adding taxes, fees and ancillary costs together, a buyer in the Balearic Islands should budget a total additional outlay of between 10% and 13% of the declared purchase price. For a property at €800,000 in Formentera, that means setting aside between €80,000 and €104,000 in transaction costs alone, on top of the purchase price itself.

The 3% withholding when the seller is a non-resident

This aspect is often overlooked by foreign buyers. If the seller is not a Spanish tax resident, Spanish law requires the buyer to withhold 3% of the purchase price and pay it directly to the Tax Agency within 30 days of signing the deed, using Form 021. This mechanism protects the Spanish treasury in the event that the non-resident seller fails to fulfil their tax obligations on the capital gain. The seller may subsequently file Form 210 to claim a partial refund if the amount withheld exceeds the tax actually due. In Formentera, where the proportion of non-resident owners is high, this clause applies frequently.

IBI: the annual property tax

Once the purchase is complete, the owner must pay the IBI (Impuesto sobre Bienes Inmuebles) each year — the Spanish equivalent of the UK council tax or Italian IMU. The tax is calculated on the cadastral value of the property, which is generally lower than market value, at a rate set by each municipality.

In Formentera the municipality sets its own IBI rates. Given the considerable gap between cadastral values and market prices on the island, the IBI tends to be relatively modest in relation to real property value. However, municipalities have the power to periodically update cadastral values, which may result in higher bills over time.

Taxation for non-residents: IRNR

Foreign owners who are not Spanish tax residents are subject to the IRNR (Impuesto sobre la Renta de No Residentes) on Spanish-source income. This tax applies in two distinct situations: when the property is rented out and generates rental income, and when the property is kept available for the owner’s personal use without being rented (deemed income).

Property kept for personal use (not rented out)

A non-resident owner who does not rent the property must still file an annual tax return declaring a deemed income calculated as 2% of the cadastral value (or 1.1% if the cadastral value has been updated within the last 10 years). The IRNR rate is then applied to this imputed figure.

Rented property

If the non-resident owner rents out the property — even for just a few summer months as is common in Formentera — the rental income received must be declared in full. EU residents have the right to deduct related expenses (mortgage interest, maintenance, IBI, depreciation). Non-EU owners may not claim any deductions.

IRNR returns for rental income are filed quarterly using Form 210; capital gains must be declared within three months of the sale. It is strongly advisable to use a local tax adviser or specialist gestoria, as the filing obligations apply regardless of whether the owner is based in the UK, Germany, the United States or any other country.

Wealth tax (Impuesto sobre el Patrimonio)

The Balearic Islands levy an annual wealth tax on net assets above certain thresholds. It is a progressive tax that applies to both residents (on worldwide assets) and non-residents (on assets located in Spain). The general allowance for non-residents is €700,000 on Spanish real estate.

For most foreign buyers holding a single high-value property in Formentera, this tax becomes a meaningful annual cost that must be planned alongside the other recurring expenses. It is worth remembering that the tax base is the cadastral value or the value declared in the deed, not necessarily the current market price.

Capital gains tax on resale

When a non-resident owner sells the property, the difference between the sale price and the original purchase price (plus documented acquisition costs) constitutes a taxable capital gain. As noted above, the rate is 19% for both EU and non-EU sellers. The non-resident seller is also liable for the Plusvalía Municipal (IIVTNU), a local tax on the increase in the urban land value, calculated on cadastral parameters and the number of years of ownership.

The sustainable tourism tax (Ecotax)

Anyone renting a property for tourist use in Formentera is required to collect the Sustainable Tourism Tax — widely known as the ecotax — from their guests and remit it to the regional administration. The amount varies depending on the category of accommodation and the time of year, with daily per-person charges ranging from €1 to €4 during the high season. This levy is not a cost borne by the owner directly, but it must be collected, managed and paid over on their behalf: failure to collect or remit it carries financial penalties.

The NIE: a mandatory prerequisite

Before proceeding with any property purchase in Spain, foreign nationals are required to obtain the NIE (Número de Identificación de Extranjero), the Spanish tax identification number. Without a NIE it is not possible to sign the notarial deed or open a Spanish bank account, both of which are indispensable for completing the transaction. The application can be made at the Spanish consulate in your country of residence or at a foreigner registration office (Oficina de Extranjeros) in Spain.

Full summary of purchase costs

Buying in Formentera: the fiscal context in brief

Formentera is one of the most exclusive property markets in the entire Mediterranean. Average property prices sit well above €800,000, with high-end villas and fincas reaching and exceeding €2,000,000. In this context, pre-purchase tax planning is not a secondary consideration but a strategic component of the entire operation. It is essential to calculate the progressive ITP liability in advance, understand the annual implications of the IRNR and the Wealth Tax, and establish a clear approach to fiscal management in the event of tourist rental activity.

Anyone wishing to explore buying or renting opportunities in Formentera can visit yourformentera.es, where property listings, local market updates and informational content for first-time buyers on the island are regularly published.

The information contained in this article is intended for general guidance only and does not constitute personalised tax or legal advice. Rates and regulations are subject to change: always consult a qualified professional before proceeding with any specific transaction.