Calculate Building Costs Mallorca

You know the price of your building contractor from the quote. Which VAT rate applies to it is decided by law — and it can double for the same volume of construction work.

What does it cost to build or renovate on Mallorca?

Honest answer first: there is no official building cost per square metre. No ministry, no Consell and no municipality publishes a figure that could reliably put a number on your renovation. What you find online in terms of ranges are inferences drawn from other people's projects — a different house, a different condition, a different year. That's why this calculator asks for your own price, the one from your quote, and works from there.

What is fixed, on the other hand, is the tax. On construction work in Spain, either the general rate of 21% or a reduced rate of 10% applies. Which one applies doesn't depend on how expensive the building work is, but on what is being built, who commissions it, and how the contract comes about. This is exactly the question the calculator answers — and only this one.

How to arrive at a reliable price

Before you enter a figure above, you need to have it. The path to getting there is unspectacular, but it's the only one that holds up:

• Clarify the condition before you plan. An independent survey will tell you whether damp has got into the Mares stone, whether the load-bearing structure is sound, and whether the electrics need renewing. We've described separately how such a survey by an expert is carried out.
• Have a schedule of works drawn up. Without a described scope of work, you're comparing prices for different jobs. Only once demolition, first-fix installation, fit-out and fittings are named item by item does a rough figure become a proper quote.
• Obtain several written quotes — for the same schedule of works, otherwise you're comparing apples with oranges again. A presupuesto (cost estimate) states quantities, unit prices and the net amount; only that is the figure that belongs in the field above.
• Check what is legally attached to the property. Unregistered extensions, incorrectly recorded living space, or easements can significantly shift the scope of the works. Read about how to check the Spanish land registry before buying and how to spot illegal extensions during the viewing itself.

What drives up the price on Mallorca is rarely the material and almost always the logistics and the existing building fabric: a building site in a mountain village in the Serra de Tramuntana that no lorry can reach; a finca without a paved access road; an old building whose wiring needs to be completely redone; and the question of whether you commission trades individually or have a general contractor take over the coordination. Whoever is just looking at what's on offer on the island marketshould factor in these points on the first viewing, not only by the third offer.

How it's calculated

The calculation itself is straightforward. Your surface area times your net price per square metre gives you the construction fee — the net fee for a defined building contract, including the materials that the executing company contributes towards it. On top of that comes the tax rate determined by the calculator. Separately commissioned planning and site management are a separate turnover: architect and site-management fees that you commission yourself and separately always carry 21%. If, on the other hand, the planning is included in the lump-sum contract of your construction company, it forms part of the construction fee and shares its rate.

What's interesting is the path to the rate, and it runs in two steps. First the turnover is classified — building work, rehabilitación (core renovation within the meaning of the VAT law) or renovación (renovation and repair of a dwelling). Then the requirements of precisely this category are examined, and only these. Anyone facing a core renovation but failing to meet its requirements does not fall back on the renovation rate instead; they pay the general rate. This is not a matter of interpretation but settled administrative case law.

The two thresholds that decide the rate

For building work and core renovations the reduced rate depends on two conditions: you must commission the construction company directly yourself (no contract via an intermediary), and at least 50% of the built area must serve residential use. The law says 'at least' — so exactly half is enough.

For renovations of a dwelling a different combination applies: the recipient must act as a private individual (a natural person who uses the dwelling themselves, or a comunidad de propietarios, i.e. the owners' association), the dwelling must be at least 2 years before the start of this work, and the cost of the materials contributed by the contractor may amount to no more than 40% of the net taxable base of this construction turnover. Exactly at the threshold is still permitted; above it, the entire contract loses the benefit. If all three points are met, the rate is 10%, otherwise the general rate applies.

When a renovation becomes a rehabilitación

The term is defined under tax law and only partially matches the everyday understanding of a “complete renovation.” Two tests must both be satisfied:

1. More than 50% of the total project costs relate to qualified works: structure, façade and roof, plus works legally treated as equivalent such as foundations, pillars, ceilings, area extensions, façade reconstruction and lifts. Related works only count if they are inseparably connected and cost less than the structural and equivalent works. Exactly half is not.
2. 25% The total project costs exceed of the comparison value of the building — excluding the land share2 years immediately before the start of the works, otherwise the market value at the start of the works.

That's why the calculator asks, for a renovation, about the reference value, the land share, the documented net project costs and the proportion of qualified works. If any of this information is missing, it deliberately does not name a rate instead of guessing one.

Worked examples: which cases the calculator distinguishes

The figures are deliberately not given here — they depend on your floor area and your price, and the calculator above provides them along with the underlying legal basis. What follows are the constellations on which the rate depends:

• New build, directly commissioned, predominantly residential use. The classic case for the reduced rate: you conclude the construction contract yourself with the executing company, and the residential floor area reaches the statutory quota.
• The same new build, but without a direct contract. If the contract runs through an intermediate contracting party, or you are a subcontractor in a chain, the benefit is lost — with an identical construction volume. The calculator names precisely this requirement as the reason.
• New build plus separately commissioned architect. Two items, two rates, calculated separately and only then added together. Anyone who lumps both together will calculate too little tax.
• Renovation that narrowly misses the cost threshold. If the project costs sit exactly at the comparison-value share rather than above it, it is not a rehabilitación. The work then falls into the renovation category — with its own requirements.
• Renovation that passes both tests, but without a direct contract. The most important case to understand: the substantial renovation is established, the requirement is missing, and falling back on the renovation rate is ruled out. The result is the general rate.
• Renovation with a high material share. Bathrooms, kitchens and floors are material-intensive. If the material share tips over the threshold, the entire order loses the reduced rate — not just the material portion.
• Renovation for a rented flat. Anyone renovating for the purpose of letting is acting as a business and falls outside the renovation category. More on this shortly.

Special cases that change the calculation

Landlords and businesses

If you let out the property, you're a business for VAT purposes — even if you've never otherwise registered a business. That's why, for you, the calculator doesn't show a final gross total, but rather the rate, the net amount, and the calculated VAT. The reason: whether this tax actually burdens you in the end depends on how the property is used. In the case of VAT-exempt residential letting — the standard case for long-term letting in Mallorca — there is generally no input tax deduction, and the tax is then a genuine cost. In the case of taxable use, such as licensed holiday letting with hotel-like services, it is deductible. In the case of mixed activity, the prorrata applies, i.e. the proportional deduction rate. And for certain construction services between businesses, the tax liability is reversed: the invoice is then issued without VAT shown, but it still has to be reported — just by you. An invoice without VAT shown does not remove the tax burden.

Mixed-use buildings

A ground floor with a shop and three flats above it is the standard case on Mallorcan village squares. For the reduced rate, what counts is the share of the built area used for residential purposes — not the share of construction costs and not the number of units. Work out the share before signing the contract, not afterwards: it's a precondition, not something to negotiate.

Multiple trades, multiple contracts

The calculator assesses one clearly defined construction contract. If you commission electrical, plumbing and carpentry work separately, each of these contracts must be assessed on its own — with its own material share, its own taxable base, and possibly its own rate. An average across the overall project has no tax relevance. Anyone who commissions the air conditioning separately has a second supply, not an ancillary service.

Materials bought yourself

Tiles, bathroom fittings or a kitchen that you buy yourself at a DIY store or from a retailer are not a construction service but a supply of goods — and carry the standard rate, regardless of what applies to the installation. The supposed money-saving trick of buying materials yourself to stay under the material threshold therefore shifts the tax rather than reducing it.

Deposits and payment plans

With advance payments, the tax already arises upon payment, not only upon completion. If the tax rate or the classification of the project changes between the advance payment and the final invoice, two different rates can apply to one and the same project. So make sure your payment schedule records which service is settled with which instalment.

Deadlines and forms

As a private building owner, you don't need to submit anything to the Finanzamt regarding the VAT. Your building company shows it on the factura and declares it itself; your task is to check and keep the invoice. If it shows a rate you weren't expecting after checking the above, that's the moment to ask — not the moment after payment.

If you're acting as a business, VAT runs through the regular return (modelo 303) and the annual summary (modelo 390); under the reverse charge mechanism, you declare the turnover yourself even though no tax appears on the invoice. For an overview of which other declarations may be due around a Spanish property, see Taxes and law for property in Spain.

Separate from the tax rate is the approval procedure. The municipality levies the local construction tax ICIO (impuesto sobre construcciones, instalaciones y obras) and an approval fee — with a different tax base than VAT: fees, business profit and the VAT itself are expressly excluded there. The calculator above does not capture these municipal charges. What you need to submit to the Ajuntament and how long it takes is covered in the article on building permits in Mallorca; for projects requiring approval, expect months rather than weeks. If your building is under heritage protection as a BIC, a separate procedure applies as well. And once the work is finished, you'll need a new energy certificate.

before selling or renting out

Course of a renovation: the sequence that works

1. The tax question is decided early on — namely at the conclusion of the contract, not at the final invoice. That's why it's worth looking at the whole process:Survey and expert assessment. Electrics, plumbing, structural framework, damp, unauthorised building elements.
2. Hire an architect. In Spain, they must be registered with the professional chamber (colegiado). For structural interventions, an official building project is mandatory; without a proyecto de obras there is no permit.
3. Draw up the building project: Description of works (memoria), plans, cost estimate. This is where the figure that belongs in the calculator above comes from.
4. Apply for the permit — and wait for the decision. Starting before the decision arrives is the most expensive mistake on this list.
5. Award the trades. Individual awards or a general contractor; in both cases, in writing and with a clear description of the work. Whether you contract directly with the executing company determines the tax rate.
6. Demolition and shell construction, then first-fix installations (electrics, plumbing, air conditioning), then interior fit-out and finishing works.
7. Final inspection and administrative sign-off: the architect's certificate of completion (certificado final de obra), and, if the floor plans have changed, updating the Land Registry and Cadastre.
8. Energy certificate and, if you have carried out energy upgrades, registering the installations — for instance if you need to register a photovoltaic system.

Alongside this, it's worth looking into grants: the Balearic regional government regularly launches programmes for renovation and energy efficiency, usually on a first-come, first-served basis. Deadlines and funding pots change frequently, so we cover them separately under Renovation grants in Mallorca.

Special features for fincas and suelo rústico

On rural land (suelo rústico) much stricter building regulations apply than within town boundaries. Renovations of existing structures are generally possible, but require a permit; an extension of the built-up area is often heavily restricted or not permitted at all. What this means for buying and remodelling is explained in the article on Finca on Suelo Rústico.

Two additional layers often come into play: in the Serra de Tramuntana, specific building protection regulations apply due to its World Heritage status, and wells or cisterns are subject to their own registration requirement — how you can legalise a well we've described step by step. This doesn't change the tax rate, but it does significantly affect the timeline and scope of works — and with that, the figures you enter above.

The most common mistakes

• Buying without a survey. Damp, faulty wiring and unpermitted extensions otherwise only come to light after the notary appointment — and this shifts the budget, not the purchase decision.
• Starting before the permit is granted. Stop-work orders and fines are not uncommon on the island. What follows then is described in the article on Legalising unauthorised buildings — a path nobody takes voluntarily.
• Not planning a buffer. With a complete renovation, something not included in the cost estimate almost always comes up. Set the reserve in advance, not in the middle of a dispute.
• Only looking at the price. The cheapest offer rarely saves money in the end: lack of coordination, poor workmanship and incomplete documentation cost more than the discount was worth.
• Asking the tax question too late. The rate depends on how the contract is structured. Once the contract is signed, a missing direct contract can no longer be argued into existence — but beforehand it can.
• Overestimating the return. Renovation costs are certain, value appreciation is an expectation. How to calculate this without fooling yourself is explained in the article for Investors in Mallorca.

Checklist before signing the contract

• An independent survey report is available, and the condition is documented.
• Land registry extract (nota simple) checked; extensions and living areas match reality.
• A registered architect has been engaged and a building project prepared.
• Clarified whether the works require a permit — and the permit is in place before the first spade hits the ground.
• Several written quotes obtained for the same schedule of works.
• Contract concluded directly with the executing company, in writing, with net amount shown.
• Material share and living-area share determined before signing the contract and checked above in the calculator.
• Fees for planning and site supervision calculated as a separate item.
• ICIO and the permit fee budgeted for in addition.
• A reserve for unforeseen costs set aside.
• Grant programmes checked, deadlines noted.
• Energy certificate and land registry update planned for completion.

What comes next

For a sale, you need an up-to-date energy certificate, and any changes to the floor plan or floor area must be updated in the land registry and cadastre. What you need to know about tax is covered in the article on Taxes on property sales in Spain — refurbishment costs are not a side issue there; they can increase the taxable acquisition value if they're documented. So keep the invoices.

For letting, the type of use determines your input VAT deduction — see above. For owner-occupation, two practical points remain: insurance cover after the renovation, which often still refers to the old condition, and the rules of the owners' association, if you renovated within a residential complex.

Legal basis and status

The Spanish VAT law is decisive, the Ley 37/1992. The general rate is set out in Art. 90.Uno, the reduced rate for construction work under direct contracts in Art. 91.Uno.3.1.º, and the reduced rate for renovation and repair of dwellings in Art. 91.Uno.2.10.º. The definition of rehabilitación with its two tests is set out in Art. 20.Uno.22.º.B) and has applied in this version since 14 April 2010. The current materials threshold and the number under which the renovation rule falls have applied since 1 September 2012; before that, the threshold was lower.

That an established full-scale renovation without meeting the requirements of Art. 91.Uno.3.1.º does not fall back on the renovation rate as an alternative was decided by the Spanish tax tribunal TEAC on 21 October 2020 (RG 00-06367-2017). The calculator implements exactly this sequence and gives you, as a result, the applicable legal route — and where applicable, 21% the requirement that is not met.

The calculator provides an assessment of the current legal position, specifically for a single construction contract. It does not replace tax advice, and does not assess a split into several trades, input VAT deduction, payment schedules, or municipal charges. For larger projects, it is worth consulting an asesor fiscal before the contract is signed.

Frequently Asked Questions

Related calculators

If you are still before the purchase stage, first work out the purchase incidental costs of a property in Mallorca — transfer tax, notary, land registry and advisory fees all help determine how much budget remains for the renovation. If, on the other hand, you are buying a new build from a developer, a different combination of VAT and stamp duty applies: for that, there is the calculator for IVA and AJD on new-build purchases.