When the tax bites
Non-residents are taxed on a limited basis, meaning only on assets located in Spain or rights exercisable in Spanish territory. A property in Mallorca, the Spanish bank account attached to it and, where applicable, shares in a company whose assets consist mainly of Spanish real estate all form part of the taxable base.
Two questions are routinely conflated. The first is whether a return must be filed, which is triggered once the value of Spanish assets and rights exceeds two million euros, even if no tax is payable. The second is whether tax is actually due, which turns on the exempt threshold and the applicable scale.
The national exempt threshold is seven hundred thousand euros per taxpayer, and the national scale runs from 0.2 to 3.5 per cent. The Balearic Islands have set a regional threshold of three million euros, in force since 1 January 2024, and apply their own scale, from 0.28 to 3.45 per cent, with no general relief on the tax due.
Those figures are best read together. The Balearic scale is not the gentler one: it starts above the national scale and finishes marginally below it. The real difference lies in the exempt threshold, which is why the question that decides the outcome is not what the rate is but which set of rules applies to you.
Electing regional rules
The decisive question for a non-resident owner is whether Balearic rules can be applied instead of the national ones. The fourth additional provision of Ley 19/1991 entitles non-resident taxpayers to apply the rules of the autonomous region where the greater value of the assets charged to the tax is located.
That entitlement is not confined to residents of the European Union. Ley 11/2021, the anti-fraud act, extended it to all non-resident taxpayers whatever their country of residence, a reading the Dirección General de Tributos, the Spanish tax authority's ruling body, adopted in binding ruling V2304-21. An owner resident in the United Kingdom, Switzerland or the United States stands, on this point, exactly where a German resident stands.
One consequence is routinely missed. The election does not operate automatically: it is made in the return itself, so the Modelo 714 has to be filed even where the result is nil. No return means no election, and without the election the applicable threshold is the national seven hundred thousand euros.
Making the election does not settle the position on its own. The temporary solidarity tax on large fortunes, introduced by Ley 38/2022, reaches high net wealth and applies to non-residents on their Spanish assets, crediting wealth tax already paid against its own liability. A saving achieved at regional level may therefore be absorbed at national level, which is why both taxes have to be modelled together.
Valuation, where the liability is actually decided
Property is taken at the highest of three figures: the cadastral value, the value determined or assessed by the tax authority for the purposes of another tax, and the price or acquisition value. Ley 11/2021 added the word "determined" to that rule, and with it the valor de referencia, the reference value published by the Land Registry, entered the wealth tax.
The effect is narrower than is often assumed, and longer lasting. It reaches property acquired from 2022 onwards, where the reference value served as the taxable base on the purchase or the inheritance, and it does not revalue property acquired before that. What the wealth tax legislation does not provide, however, is any route to challenge that figure: an owner who did not contest it in the acquisition tax carries it into every year that follows.
Debts reduce the taxable base only where they relate directly to the Spanish assets. A mortgage over the house in Mallorca reduces the base; a personal loan taken out in your home country does not.
What the service covers
- Assessment of liability and quantification of the real exposure, including property valuation, ownership and each co-owner's share.
- Analysis of the election for Balearic rules and of its combined effect with the solidarity tax on large fortunes.
- Filing of the Modelo 714 even where no tax is payable. This is not a formality: filing is the act by which the election for Balearic rules is made, and with it the three million threshold. Absent a return, the national scale and threshold are taken to apply.
- Filing of the Modelo 714 and, where applicable, the Modelo 718, coordinated with the Modelo 210 for the same year.
- Review of corporate holding structures, particularly where the company's assets consist mainly of Spanish real estate.
What we need from you
The purchase deed, the IBI receipt, year end and fourth quarter average balances of Spanish bank accounts, a certificate of the outstanding mortgage as at 31 December, the NIE and a certificate of tax residence.
We work from Palma de Mallorca and Manacor, in English, German and Spanish. Where a client also lets or keeps a property at their disposal on the island, we coordinate this review with their Modelo 210 filing, so the two returns do not take inconsistent positions.
Frequently asked questions
I own a valuable house in Mallorca and have never filed anything. Should I have?
Quite possibly. The filing obligation arises once Spanish assets and rights exceed two million euros in value, even where no tax is due. The open years should be reviewed.
Does the three million threshold apply to a non-resident?
The right to elect Balearic rules belongs to every non-resident taxpayer, wherever resident, following the reform introduced by Ley 11/2021. The election is not automatic, though: it is made in the return, so the Modelo 714 must be filed even when nothing is payable. No return, no election, and without the election the national threshold applies.
What if the property is held through a foreign company?
Interposing a company does not by itself take the asset outside the charge. Shares in entities whose assets consist mainly of Spanish real estate are treated as assets located in Spain.
Is this connected to the Modelo 210?
They are separate and compatible taxes. The same property can generate imputed income for non-resident income tax and form part of the wealth tax base in the same year.