Balearic government plans to put up high-end property purchase taxes

Already the region with the highest marginal rate of tax on property purchases, the hard-left faction of the regional government has announced plans to soak the rich next year.

When you buy a home in the Balearics for more than €1m you pay a marginal tax rate of 11.5% in transfer tax (ITP), which is the highest in Spain.  In the Spanish capital Madrid, in contrast, you pay just 6%, whilst in Andalusia you pay 7%.^{corrected from 10%}

Alejandro López, spokesman for the hard-left Podemos Party in the regional government coalition, recently told the press that a new tax bracket of 13% will be created next year for properties sold for €2m or more, whilst the marginal tax rate on sales of €1m or more will go up from 11.5% to 12%.

“We’re talking at all times about a part of the citizenry that has accumulated a lot of wealth, very rich people,” says López, in comments to the Spanish press. It would have been more accurate to say “we’re talking about foreigners” because they will probably be the group most affected.

The Balearic property industry has reacted with dismay at the news. The ABINI industry association has pointed out this would make the Balearics less competitive as a region to move to or buy a holiday-home. “It would be the third increase in purchase taxes by this coalition government, and the loss of competitiveness compared to other destinations that have more flexible fiscal systems capable of generating income and diversifying the economy this would entail is very worrying,” says a statement from the ABINI.

The ABINI has also warned that regional urban planning policies, and the recent rise in construction costs exacerbated by the war in Ukraine, will only make housing scarcer and most expensive in the Balearics. ABINI point out the cost of building materials has risen as much in the first seven months of 2022 as in the previous 20 years combined.

See SPI’s Spanish property tax guide