Balearic Islands Slash Sky-High Property Tax

The Balearic Islands are notorious for having one of the most expensive Property Transfer Taxes in Spain.

As of 2022, the Government of the Balearic Islands, led by Marga Prohens, collected a staggering €900 million from this tax, the highest figure in Spain in relative terms, writes OK Diario.

A Taxing Situation: Current Rates Across Spain

In the Balearic Islands, the general tax rate ranges from eight to 13 per cent, depending on the property’s value. In contrast, Madrid has a flat rate of six per cent. Navarra and the Canary Islands have rates between five and six per cent, and five and 6.5 per cent, respectively. Catalonia’s rate is between 10 and 11 per cent.

Luxury Homes And Tax Hikes

It’s worth noting that the Armengol Government approved a tax hike for luxury homes, pushing the maximum rate from 11.5 to 13 per cent. Simultaneously, a reduction from eight to four per cent was approved for apartments priced under €270,000, provided they are the buyer’s primary residence. Properties priced between €1 million and €2 million are taxed at 12 per cent, while those over €3 million are taxed at 13 per cent.

New Reforms: Tax Cuts And Exemptions

Now, Marga Prohens’ Government is introducing reforms. The tax will be completely waived for first-time homebuyers under 30 and for people with disabilities. This applies to homes valued up to €270,000, and may be extended to €350,000 in high-stress areas.

For those under 35, large families, or single parents, the tax is halved for the purchase of a first home. Again, this applies to homes up to €270,000, reducing the rate from four to two per cent.

What’s Next: Parliamentary Debate

At present, there’s no discussion about reducing the 13 per cent maximum rate for luxury homes, although changes are not off the table. These tax measures are part of a decree that has also abolished Inheritance Tax between close family members. The decree is now set for parliamentary debate, where further tax reductions may be introduced.