Renting out correctly on Mallorca: What you need to know

The differences between long-term residential, holiday, and seasonal rentals in Mallorca.

Holidaymakers, seasonal workers or long-term tenants? Making the decision about which type of renting is best suited to your own Mallorca property is not easy, but what is the difference between residential, holiday and seasonal rentals? What do you need to consider from a tax perspective?

Holiday rental of properties on Mallorca: No longer than one month

Investors often expect the best profitability to come from holiday rentals. Due to the boom in short-term rentals to holidaymakers in Mallorca and on the neighbouring islands in recent years, the Balearic government saw the need to restrict these unregulated offers.

In 2012 legislation was passed which required properties on the islands to have a touristic rental licence in order to be used for holiday rentals, with a fine of at least 20,001 euros foreseen for renting without the appropriate licence.

Inspectors routinely check the licences, and holidaymakers can also use the online application ‘Holiday Rental Check Mallorca’ to ascertain whether they are renting a holiday home which is legal.

Since 2022, the tourism authorities in Mallorca have not issued any new holiday rental licences, although anyone who purchases a property with an existing licence may continue to rent it out to holidaymakers. The licence is transferable to the next owner.

The tourism laws of the Balearic islands define what is required to qualify as a holiday rental

In principle, any letting of a residential property for a period of less than 30 days is considered to be a touristic (short term) rental – unless the landlord can prove to the tourism authority that the property has not been rented out to holidaymakers for a fee on a daily or weekly basis. As a rule, only whole houses – in some areas also complete apartments – may be let to holidaymakers but renting out individual rooms is not permitted, with very few exceptions.

Added to that, legal holiday homes must be fully equipped (furniture, crockery, etc.). Some owners also offer services similar to those provided by hotels, such as regular cleaning services.

Another indication factor is the marketing method

From the point of view of the authorities, a further factor indicating holiday letting is marketing via “tourism distribution channels”. These include online platforms, social networks and agencies. The term ‘tourist distribution channel’ is, however, broadly defined. The inspectors from the tourism authorities can, for example, decide that a rental is a tourist rental if it has been offered using very diverse media methods, and can take the appropriate steps should it be established that no licence exists.
From a tax perspective it is important to note that holiday rental owners are obliged by law to collect the tourism tax from their guests and pass it on to the tax authorities.

Holiday letting – with or without turnover tax?

For non-residents, holiday rentals subject to turnover tax require the establishment of a permanent business, which generally makes them subject to corporate tax regulations. The difference, compared to holiday rentals exempt from turnover tax (which entail a much simpler tax regime), is decided by the services provided during the stay of the guest, (e.g. cleaning service).

When using the tax-exempt modality, non-residents must submit a tax return (Modelo 210) by the 20th. of the month following each quarter year, showing rental income and taking into account the costs and depreciation involved.

For EU citizens, 19 per cent income tax is payable on the tax base calculated. If there is no tax liability, no tax return is required. The calculations must, however, be presented in order to calculate costs which must be carried forward.

Long-term rentals on Mallorca: tax advantage for residents

Rentals longer than 30 days are categorically subject to the Residential Letting Act (LAU). Article 2 of the law states:

“A tenancy for residential purposes is seen as the renting of a habitable building, the main purpose of which is to satisfy the tenant’s need for permanent accommodation.”

This means that properties which are fully furnished, and also temporarily rented on a limited-time basis, and are marketed through touristic rental distribution channels do not fall within the scope of the Residential Letting Act.

For long-term letting to be in conformity with the law, various requirements must be met. Amongst other things a deposit of at least one month’s rent must be paid, and the conclusion of a written rental contract agreement is required. Both the owner/renter and the tenants must fulfil certain obligations in the contractual obligations for long-term renting. The property must be handed over in a condition in accordance with the description in the contract, while the tenant is in turn obliged to take care of, and use the property in a proper manner, to name but two examples.

The tax for long-term rentals is less complicated in comparison to holiday rentals: Long-term rentals are in principle exempt from turnover tax. However, non-residents who rent out their apartment or house in Mallorca on a permanent basis must submit the Modelo 210 tax return on a quarterly basis. Long-term renting for residential purposes, however, offers residents an important advantage – 60 percent of the profit is tax-free.

Seasonal rentals of properties: use for a limited period of time

Seasonal rentals are also defined in the LAU (Article 3), but rather succinctly as “buildings which serve purposes other than those in the aforementioned article.”

The difference to long-term rentals is that the tenant does not use the property as a permanent residence. It is strongly advisable to mention the address of the main residence in the seasonal tenancy agreement.

Seasonal rentals are intended for a limited period of time: for example for seasonal workers who move to Mallorca to work in the summer, or as longer-term holiday rentals over periods of weeks or even months. The purpose (seasonal work, study stay, etc.) of the rental is important and should also be stated in the seasonal rental contract. Seasonal rental contracts are much more landlord-friendly than long-term leases. From a tax perspective, the same rules apply as for long-term rentals.

This article was written by the tax consultancy and law firm PlattesGroup based in Palma. Porta Mallorquina is not responsible for the accuracy of the information. For individual information, please contact PlattesGroup directly.

Porta Mallorquina and Porta Holiday: Your partners for reliable renting in Mallorca

Apart from purchase and sale, Porta Mallorquina are also specialists in exclusive properties for long-term rental. Porta Holiday is your reliable partner for holiday rentals.

Do you own property in Mallorca and would like to rent it out? Then we would be very happy to advise you.

Read also our detailed blog post about the current legal situation regarding vacation rentals in Mallorca.