Buying a Property in Ibiza? Here’s the Tax Reality Every Non-Resident Must Know

Taxes Explained When Buying a Property in Ibiza: A Guide for Non-Residents

Buying a property in Ibiza is an attractive investment for international buyers seeking lifestyle, security, and long-term value. However, Spain’s tax system can be complex—especially for non-residents unfamiliar with local regulations. Understanding the taxes involved is essential to avoid surprises and ensure a smooth transaction.

This guide, written from a tax advisory perspective, explains the key taxes non-resident buyers should consider when purchasing property in Ibiza.

1. Transfer Tax vs VAT: What Applies to Your Purchase

The first and most significant cost depends on whether the property is resale or new build.

Resale Property (Second-Hand)

If you purchase a resale property, you will pay:

Transfer Tax (Impuesto de Transmisiones Patrimoniales – ITP)
In the Balearic Islands, this is typically:
- 8% to 11%, depending on the purchase price

This tax is paid by the buyer and must be settled within 30 days of completion.

New Build Property

If the property is newly built and purchased from a developer:

VAT (IVA): 10%
Stamp Duty (AJD): approx. 1.5%

👉 Total: ~11.5%

This is slightly higher than resale, but new builds may offer advantages such as energy efficiency and lower maintenance.

2. Notary, Land Registry and Legal Fees

Beyond taxes, buyers must account for transaction costs:

Notary fees: ~0.5% – 1%
Land Registry fees: ~0.5%
Legal fees: typically 1% (highly recommended for non-residents)

Total additional costs: ~2% – 3%

Working with an experienced lawyer is essential to ensure due diligence, especially regarding urban planning and property legality in Ibiza.

3. Non-Resident Tax (Annual Obligation)

If you are not a Spanish tax resident, you are still subject to Non-Resident Income Tax (IRNR).

If the property is NOT rented out:

You must declare a deemed rental income, calculated as:

1.1% or 2% of the cadastral value
Taxed at:
- 19% for EU residents
- 24% for non-EU residents

If the property IS rented out:

EU residents:
- Taxed at 19% on net income (expenses deductible)
Non-EU residents:
- Taxed at 24% on gross income (no deductions)

This distinction is critical and often overlooked.

4. Wealth Tax (Impuesto sobre el Patrimonio)

Spain applies a Wealth Tax on worldwide assets for residents and Spanish assets for non-residents.

In the Balearic Islands:

Allowance: approx. €700,000 per individual
Rates: 0.28% to 3.45%

👉 Many Ibiza properties exceed this threshold, so planning is essential.

5. Capital Gains Tax (When Selling)

When you eventually sell the property:

Capital Gains Tax (CGT) applies

For non-residents:

19% (EU residents)
24% (non-EU residents)

👉 Additionally:

The buyer will retain 3% of the sale price and pay it directly to the tax authorities as an advance payment.

6. Local Taxes: IBI and Waste Collection

As a property owner, you will also pay annual local taxes:

IBI (Council Tax): varies depending on the property value
Rubbish collection (Basura): typically €200–€500/year

These are relatively low compared to other European destinations.

7. Mortgage and Financing Considerations

If financing the purchase:

Spanish banks usually offer:
- 60%–70% LTV for non-residents

Additional costs include:

Mortgage arrangement fees
Property valuation

👉 Note: Mortgage stamp duty is now generally paid by the bank.

8. Structuring the Purchase: Personal vs Company

One of the most important decisions is how to structure the purchase.

Buying in your personal name

✔ Simpler
✔ Lower ongoing costs
❌ Less tax planning flexibility

Buying through a company

✔ Potential tax efficiencies
✔ Asset protection
❌ Higher complexity
❌ Additional compliance

This must be carefully assessed case by case—there is no universal solution.

9. Common Mistakes Non-Residents Make

Underestimating total purchase costs
Not planning for Wealth Tax
Incorrect tax treatment of rental income
Buying without proper legal due diligence
Using the wrong ownership structure

These mistakes can be costly and are easily avoidable with proper advice.

10. Why Professional Advice Is Essential

Ibiza’s property market is unique, with specific legal and planning considerations. Combined with Spain’s layered tax system, this makes professional advice not just recommended—but essential.

A coordinated team of:

Tax advisor
Lawyer
Real estate agent

…ensures a secure and efficient transaction.