In a remarkable development for property owners in Mallorca, the local island government has approved a significant change in wealth tax policy. From next year, the wealth tax allowance will be raised from the current 700,000 euros per person to an impressive three million euros. This change marks an important turning point for investors and property owners on the popular Balearic island.
Why abolishing the wealth tax is currently not possible
Despite the positive trend towards higher tax allowances, a complete abolition of wealth tax in Mallorca is currently not feasible. The main reason for this is the wealth tax adopted by the Spanish central government. This national tax regulation sets certain framework conditions that prevent the complete elimination of wealth tax at regional level.
Tax reductions for long-term rentals: An incentive for owners
In addition to the increase in the tax-free allowance, the government has adopted further measures that are of particular interest to owners who put their properties into long-term rental. These measures include significant tax reductions, which should serve as an incentive to offer more housing on the long-term rental market. This could not only improve the availability of rental properties in Mallorca, but also represent an attractive source of income for property owners.
Important note: Consult your tax advisor
It is important to emphasize that this information provides a general overview and does not serve as specific tax advice. We recommend that all property owners and investors in Mallorca contact a qualified tax advisor for personalized advice. This will ensure that you fully understand and make the most of the new regulations.
Background on wealth tax and resident status
The previous property tax has long been a major obstacle to wealthy foreigners settling in the Balearic Islands. This is because as a non-resident, only non-movable property, i.e. real estate, is taxed. As a resident, the wealth tax applied and still applies to all global assets.
Of course, we can only speculate about the effects of the new law. However, the thoughts are moving in a very positive direction. After all, it should now become even more attractive for many wealthy foreigners to move to the Balearic Islands. As a result, the situation on the real estate market is likely to remain very healthy in the future and prices should continue to rise steadily.
Conclusion
The increase in the property tax allowance and the tax cuts for long-term rentals are positive developments for the real estate market in Mallorca. They offer new opportunities and incentives to both current and potential property owners. At Claus von Benz Real Estate, we are always keen to keep you informed of the latest developments and opportunities in the real estate market. Please do not hesitate to contact us for further information and individual advice.
Note: This article was written as of 20.12.2023 and reflects the information available at that time. Changes in legislation or tax policy may occur after this date.