Taxes when buying a new home in Menorca (2026): VAT, stamp duty and transfer tax
A new home bought from the developer pays 10% VAT and, on the deed, 1.5% stamp duty on notarial documents (AJD) in the Balearic Islands, or 2% if it is worth one million euros or more. A resale home pays no VAT but property transfer tax (ITP), which in the Balearic Islands is calculated on a banded scale from 8% to 13%.
New home: 10% VAT
The first sale of a home by its developer is subject to VAT at the reduced rate:
“One. The 10 per cent rate shall apply to the following transactions: […] 7. Buildings or parts of buildings suitable for use as dwellings, including parking spaces, up to a maximum of two units, and annexes located in them that are transferred together.”Ley 37/1992 (VAT Act), art. 91.Uno.1.7.º
The law treats as the “first delivery” the one made by the developer of a completed building (art. 20.Uno.22.º.A). Later sales, the “second and subsequent deliveries”, are VAT-exempt and, as a general rule, pay property transfer tax instead (ITP and AJD Act, art. 7.5).
The deed: stamp duty (AJD)
When a purchase is subject to VAT, the deed also pays AJD (ITP and AJD Act, art. 31.2) at the rate set by each region. In the Balearic Islands:
- 1.5% as a general rule (Balearic consolidated text on ceded taxes, art. 15).
- 2% if the property is worth €1,000,000 or more: “when the real or declared value […] of the property is equal to or greater than 1,000,000 euros, they are taxed at the rate of 2%” (art. 17 bis).
There is a reduced 1% rate for a first main residence worth up to €270,151.20 (art. 17.1), which does not apply to a second home.
Resale home: property transfer tax (ITP)
In the Balearic Islands, ITP on a property is not a single percentage: the banded scale is applied to the total value and the result gives an “average rate” (Balearic consolidated text, art. 10.a):
| Total value from | Tax on the lower band | Rest of value up to | Rate |
|---|---|---|---|
| €0 | €0 | €400,000 | 8% |
| €400,000.01 | €32,000 | €200,000 | 9% |
| €600,000.01 | €50,000 | €400,000 | 10% |
| €1,000,000.01 | €90,000 | €2,000,000 | 12% |
| €2,000,000.01 | €210,000 | and above | 13% |
Plot for self-build: it depends on who sells
With self-build, you first buy the plot and then hire the construction. Each part is taxed differently:
- The plot, if sold by a company or professional in the course of business: the sale of building land pays VAT at the standard 21% rate (VAT Act, art. 90.Uno), because the exemption in article 20.Uno.20.º only covers rural and non-buildable land. The deed also pays AJD.
- The plot, if sold by a private individual: there is no VAT and the transaction pays ITP on the scale above (ITP and AJD Act, art. 7.5).
- Building the home: pays 10% VAT if you contract it directly as the developer: “Construction works […] resulting from contracts entered into directly between the developer and the contractor for the construction or renovation of buildings or parts of buildings intended mainly as dwellings” (VAT Act, art. 91.Uno.3.1.º).
For each LLUM sale we will tell you which regime applies. Ask your tax adviser to calculate the final amount with the figures of your purchase.
After buying: the annual non-resident tax
If you are not resident in Spain and the villa is for your own use, every year you pay non-resident income tax (IRNR) on “imputed” income, even if you do not rent it out (IRNR Act, art. 13.1.h).
- The imputed income is a percentage of the cadastral value: 2% as a general rule, or 1.1% if the municipality's cadastral values have been revised under the terms of article 85 of the Personal Income Tax Act, to which the IRNR Act refers (art. 24.5). The Tax Agency publishes the percentage that applies each year.
- The rate is 24% as a general rule, or 19% for residents of another EU or European Economic Area state with an effective exchange of tax information (IRNR Act, art. 25.1.a).
- The tax accrues on 31 December and is declared on form 210 (Tax Agency).
If you buy from a non-resident seller
In a resale, if the seller is not resident in Spain, the buyer must withhold 3% of the price and pay it to the Tax Agency on account of the seller's tax:
“In the case of transfers of real estate located in Spanish territory by taxpayers acting without a permanent establishment, the acquirer shall be obliged to withhold and pay 3 per cent, or to make the corresponding payment on account, of the agreed consideration […].”IRNR Act, art. 25.2
If you have read that imputed income changes in 2027
Royal Decree-law 26/2026 of 29 September changed imputed income under personal income tax from 2027 to a scale from 1.1% to 3%. Congress did not ratify it and it was repealed on 2 October 2026 (BOE-A-2026-20526), so those changes do not apply.
Sources
- Ley 37/1992, del Impuesto sobre el Valor Añadido (consolidated text, BOE) — arts. 20.Uno.20.º and 22.º, 90.Uno and 91.Uno
- Real Decreto Legislativo 1/1993, Ley del ITP y AJD (BOE) — arts. 7.5 and 31.2
- Decreto Legislativo 1/2014, texto refundido de tributos cedidos de las Illes Balears (BOE) — arts. 10, 15, 17 and 17 bis
- Real Decreto Legislativo 5/2004, Ley del Impuesto sobre la Renta de no Residentes (BOE) — arts. 13.1.h), 24.5 and 25
- Ley 35/2006, del IRPF (BOE) — art. 85
- Agencia Tributaria: imputed income from urban property for own use (non-residents)
- Resolución de 2 de octubre de 2026, derogation of Real Decreto-ley 26/2026 (BOE)
Informative article, written on the basis of the regulations in force on the review date. It does not replace advice from a lawyer or tax adviser on your specific case. Quotations from Spanish legislation are unofficial translations: only the Spanish text published in the official gazettes is authentic.
