VAT Increases Add More Grief to the Mallorca Real Estate Market

The Spanish government is still scrambling to make ends meet as it was recently forced to resort to financial aids from the European Union. Their latest effort to make more money was a tax hike from 8% to a whopping 18% which, needless to say, will have an impact on even the most prosperous real estate market such as the buying Mallorca properties.

Up to now, the Balearics seemed to be the only ones that weren’t as affected by the real estate crisis registering stagnation rather than a decrease like so many other places on the mainland. Now, people in the Mallorca tourism industry are complaining the government is trying to undermine the only viable market on the island that is proving financially sustainable.


The income generated by the visiting tourists and by people purchasing property in Mallorca and the other Balearic islands is considerable and the locals are worried that an increase in VAT will make the islands less competitive with countries such as Greece that have promised to cut VAT altogether on tourist industries.

The estimated decrease is about half a million tourists per year and the disappearance of over 700 businesses which would amount to 82 million euros of revenues not to mention 21,000 jobs. Furthermore, large travel companies such as TUI have announced that they would rethink their travel program should Spain go ahead with the tax increase.

Real estaters in Mallorca are already scrambling to adapt to this new measure but the outcome might prove bleak as the Spanish government is currently facing tough austerity measures as it’s looking to ensure the 30,000 million euro loans from the EU.

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