Long-term rental yield

What's left over with long-term rentals in Mallorca?

From the gross rent of your property in long-term rentals in Mallorca, the Spanish tax office first deducts the deductible costs and the depreciation; what remains afterwards is the income on which the tax is calculated. For the vast majority of German owners – not tax resident in Spain – none of the reductions that resident landlords can claim apply: EU citizens are taxed on their income after costs, owners from non-EU countries even on the full gross rent. What ultimately remains as a return on your invested capital is shown by the calculator above for your own figures.

How it's calculated

The starting point is the contractually agreed gross rent for twelve months. From this, the calculator deducts the deductible costs – ongoing expenses such as comunidad, insurance and property tax, as well as maintenance costs and interest, insofar as they are related to the rental. You'll find a detailed overview of exactly what is deductible in the guide to deductible costs for landlords in the Balearics. On top of this comes the amortización, the annual depreciation of the building value – it reduces the income without actually costing you any money, at 3% of the building share. What remains afterwards is the rendimiento neto – the income after deduction of costs.

Only now do the paths diverge. If you are tax resident in Spain, a reduction under Art. 23.2 LIRPF applies: as a general rule 50% of the income, in the case of a rehabilitación 60%, in the case of a new contract with a noticeably reduced rent in a zona de mercado residencial tensionado – an officially designated stressed housing market area, more on this in the guide to rent controls in Mallorca's stressed housing markets – 90%, in the case of a young tenant or one renting under a social or public scheme in such a zone 70%, and in the case of an old contract dating from before the current reform, under the transitional rule 60%. If, on the other hand, you are not resident in Spain, this reduction is entirely unavailable: Art. 24.1 of the Real Decreto Legislativo 5/2004 explicitly excludes it for non-residents. EU and EEA residents then pay 19% on the income after costs, taxpayers from non-EU countries 24% – and that on the full gross rent, because Art. 24.6 of the same law does not allow them any deduction of costs. Anyone resident in Spain instead pays the progressive IRPF rate – the income tax for residents in Spain –, which the calculator determines by comparing the tax burden with and without the rental income. In the end, what remains is the return: the income after tax in relation to the total investment made up of the purchase price, purchase-related costs and any initial investments.

Worked examples

Rather than working here with example figures that wouldn't fit your case anyway, the calculator above sets out the key scenarios side by side: the resident landlady entitled to one of the reductions, the EU citizen who may only deduct his costs, and the owner from a non-EU country who pays tax on the gross rent. Enter your purchase price, your incidental costs, the monthly rent and your ongoing expenses, choose your status and – if you are resident in Spain – the applicable reduction case, and you'll immediately see what's left after tax and what return this produces on your total investment. Payment defaults over individual months can also be entered, to see their effect on the result.

Special cases

This calculator is deliberately not built for certain constellations, and it won't provide a result for them: if you let to your spouse or to relatives up to the third degree, Art. 24 LIRPF sets its own minimum yield that differs from the normal calculation. If you organise the letting commercially – for example with at least one full-time employee looking after it – Art. 27.2 LIRPF triggers a completely different classification as an economic activity. You should clarify both cases separately with your advisor; if you're grappling with the underlying question, the guide on weighing up owner-occupation versus letting can also help with the classification.

Even within its scope of application, the calculator doesn't cover everything. If the flat is genuinely vacant – not just a payment default under an existing contract, but without any tenant at all – an additional imputación de rentas may arise for those days: a fictitious income that the tax office assumes for owner-occupation. The calculator doesn't factor in this additional imputation; it only reduces the rent received by the unpaid months. It likewise doesn't separately depreciate value-enhancing building works and newly purchased furniture – it only accounts for the ongoing depreciation of the building itself. And a breach of the rent-control rules under Art. 17.6 LAU retroactively cancels all reductions, even if the case for a reduction would otherwise apply. Finally: the Balearic half-rate that the calculator applies for residents assumes a tax residence in the Balearics – if you're tax-resident elsewhere in Spain, the regional rate there applies instead.

The legal framework: LAU

The Ley de Arrendamientos Urbanos (LAU) – Spain's residential tenancy law – governs how long a tenancy is extended against your will. If you let as a private individual, a contract agreed for a shorter term is compulsorily extended up to a minimum term of 5 years; if you let through a company, it's 7 years. After that, provided neither side objects, a tacit extension of up to a further 3 years follows. As a deposit – fianza – the law prescribes 1 month's rent in cash; you can find out more about handling it in the guide on the deposit for rental flats in Spain.

But the decisive point for your planning lies elsewhere: this minimum term protects the tenant – it guarantees you, as landlord, nothing. Under Art. 11 LAU, the tenant may unilaterally terminate the contract after as little as 6 months, giving 30 days' notice. So don't count on years of secured rental income just because the law provides for a minimum term. If a dispute over eviction arises later, the guide on the course of an eviction claim (desahucio) in Spain the path to get there.

Deadlines and forms

If you are not resident in Spain, you declare your rental income via the Modelo 210 – the tax form for non-residents – in which EU and EEA residents can claim their costs, while third-country nationals must enter the gross rent. If you are resident in Spain, the rental income belongs in your regular annual return, the Modelo 100. Your Gestoría – a Spanish administrative office – can best advise you on how often and by which deadline you need to declare in your specific case; you can find more on the ongoing declaration obligation for non-residents in the Guide to taxing rental income as a non-resident in Spain.

Legal basis and status

This calculation is based on Art. 23 and 24 of the Ley 35/2006 (LIRPF) for residents, on Art. 24 and 25 of the Real Decreto Legislativo 5/2004 for non-residents, on the Ley 29/1994 (LAU) for the rental law framework, and on the Ley 12/2023, which introduced the current reduction rates and the zonas de mercado residencial tensionado. The calculator itself shows you the status of the values stored in it.

Frequently asked questions

Related calculators

If you haven't yet decided between tourist and long-term letting, it's worth taking a look first at the Guide to long-term rental in Mallorca with the practical basics beyond tax matters. For the cost side, the already linked guide to deductible costs will help, and anyone who, as a non-resident, wants to understand in principle how tax on rental income works will find it in the Guide to taxing rental income as a non-resident. Anyone still unsure whether letting is the right choice at all will find a comparison in the Guide to owner-occupation or letting.