Luxury real estate rentals in Mallorca

Everything you need to know if you want to rent a luxury property in Mallorca.

A luxury property in Mallorca is subject to various laws and taxes. When renting, you should consider their impact and scope. This way you can get the most out of your property. However, before you start this activity, you should consider some aspects. 

Types of leases and their legality

First of all, there are a variety of rental models, but they are all regulated by the Law on Urban Leases (LAU) and apply to the entire territory. 

This establishes the rights and obligations of both the tenant and the landlord of the luxury property in Mallorca. These are the following: 

• Lease of habitual residence. Allows a tenant to use a property for a fee. To qualify as such, the tenant must reside there for at least two years. The term of the contracts is five years with the possibility of extending them for another three years.
• Temporary Rental. This type of contract is signed for less than a year and for sporadic use of the property, such as for a student. Although it is a very short period, it can be extended if it is in the interest of both parties.
• Tourist Rental. This has a vacation purpose and is not regulated by the LUA. In this case, it is a service comparable to that of a hotel. The duration is very short.
• Rent with option to buy. The tenant has the option to purchase the property at the end of the contract. In addition, the monthly payment can be considered as an advance on the total price.
• Social renting. This is a state protection measure in which housing is offered at a lower price than the market price.

Taxes related to the rental of a property in the Balearic Islands

The taxes payable on rentals in the Balearic Islands are subject to land transfer tax and stamp duty. This is reserved for the autonomous community and is applied when contracts are signed, as is the case with luxury properties in Mallorca. 

The tax base is the actual value of the land, and the taxpayer is the tenant. There are two types of levies: general and special taxes.

General taxes

Here we distinguish four categories, each of which applies to specific situations. The most interesting for you is tax category A, where a rate between 8 % and 13 % applies, depending on the total value of the property. The latter ranges from 0 to 2 000 000 euros.

Special taxes

These include very special cases for which a reduced rate applies. But none of them apply to the rental of a luxury property in Mallorca. 

The moratorium on vacation licenses in Mallorca

The moratorium results from the Law for Circular Economy and Sustainability in Tourism. It was approved by the Consell de Govern at the beginning of 2022 and has a duration of four years.

This is to limit the growth of new hotels or resorts on the islands. The government itself will be responsible for setting a maximum number of licenses, which will be lower than the current tourist population.

In the specific case of Mallorca, the pool will consist of 8,500 seats. They will be divided as follows: 4840 are for hotels and 3640 for vacation accommodation. In addition, another 14,000 places will be offered for sale in 2024.

The measure affects a total of 18,718 licenses, of which 8,486 are located in Mallorca. Its program objective is divided into four priorities. It aims at social and economic sustainability, circular economy and environmental protection, modernization and simplification of the management and maintenance of the territory. In addition, the government wants to promote a model based on quality and not quantity.

Can the vacation rental license be transferred when a property is sold?

The transfer of the license when selling a property is possible, as the property is related to the person who owns it, or not. After carrying out the procedure, the new owner must provide proof of ownership of the luxury property in Mallorca by presenting the appropriate document.

The new lease law supports this in its text. The exchange or sale of the licenses is prevented, but not the exchange or sale of the land to which they are attached. In this way, the number of places is prevented from increasing or changing in any way.

All in all, owning a luxury property in Mallorca is worthwhile, even if you have to be aware of the laws. As you have noted, there are important changes in vacation rental licenses. Such a legal act will have a direct impact on the cost of real estate, which is yet to be quantified.