Taxes when selling a property in Menorca: plusvalía, capital gains and the 3% retention

Anyone selling a property in Menorca generally pays two taxes: the municipal plusvalía (IIVTNU), settled at the town hall of the municipality where the property is located within 30 working days of the signing, and tax on the capital gain, declared through personal income tax (IRPF) if the seller is a Spanish tax resident, or through non-resident income tax (IRNR) if not. On top of this, when the seller is not a Spanish tax resident, the buyer must withhold 3% of the price and pay it directly to the tax authorities. Understanding these three elements before signing avoids surprises at the notary's office and allows the net proceeds of the sale to be calculated accurately.

Which taxes does the seller of a property in Menorca pay?

The seller pays the municipal plusvalía and the tax on the capital gain; the buyer pays transfer tax (ITP) or VAT. These are separate taxes, handled by different authorities and subject to different deadlines.

Keeping the concepts apart matters, because this is one of the most common sources of confusion among first-time sellers:

• Municipal plusvalía (IIVTNU): a local tax. It taxes the increase in the value of the urban land during the years of ownership. It is paid to the town hall of Maó, Ciutadella, Alaior, Es Castell, Es Mercadal, Es Migjorn Gran, Ferreries or Sant Lluís, depending on where the property is located.
• Capital gain: a state tax. It taxes the difference between the transfer value and the acquisition value. It is declared through IRPF (residents) or through form 210 under the IRNR regime (non-residents).
• The 3% retention: not an additional tax, but a payment on account of the IRNR that only applies when the seller is not a Spanish tax resident.

To these should be added costs that are not taxes but still form part of the cost of selling: the energy performance certificate, the registry cancellation of a mortgage already repaid, the estate agency fees and, where applicable, the share of notary costs attributable to the seller.

What is the municipal plusvalía and how is it calculated in 2026?

The municipal plusvalía taxes only the increase in the value of urban land, not the building or the total sale price. Since the reform introduced by Royal Decree-Law 26/2021 there are two calculation methods, and the one more favourable to the taxpayer applies.

The two methods are:

1. Objective method: the cadastral value of the land at the time of transfer is multiplied by a coefficient set by each town hall according to the number of years since purchase, within state-imposed maximum limits. For properties held for twenty years or more, the maximum coefficient applicable in 2026 is 0.40.
2. Real method: the actual difference between the acquisition price and the transfer price is taken, and the percentage that the cadastral value of the land represents within the total cadastral value is applied to it.

The resulting taxable base is subject to the rate set by each town hall, with a legal maximum of 30%. The calculation period is capped at twenty years.

If there has been no real increase in land value, the tax is not triggered. In other words, a seller who sells at a price equal to or lower than the purchase price pays no plusvalía, but must prove it by producing both the acquisition and sale deeds. Many town halls still require the declaration to be filed even when the result is zero, precisely so that the non-liability is on record.

An important point for foreign sellers: when the seller does not reside in Spain, the buyer acts as substitute taxpayer and becomes liable to the town hall for the plusvalía, without prejudice to passing the cost back to the seller. For this reason it is common to set out in the deposit contract exactly how this payment will be handled, usually by withholding the estimated amount from the price at signing.

How is the capital gain taxed if the seller is a Spanish tax resident?

A tax resident declares the gain in the savings base of the following year's IRPF return, at progressive rates ranging in 2026 from 19% to 30%.

The gain is calculated by deducting the acquisition value from the transfer value, both adjusted for the costs and taxes associated with each transaction. The current brackets are:

This is a banded scale: a single rate is not applied to the whole amount, but each portion of the gain is taxed at its corresponding rate. A gain of €120,000, for example, is not taxed entirely at 23%, but split across the first three brackets.

What is the 3% retention when the seller is a non-resident?

If the seller is not a Spanish tax resident, the buyer is obliged to withhold 3% of the agreed price and pay it to the Spanish tax agency using form 211, within one month of signing the deed.

This retention works as a payment on account of the non-resident income tax that the seller must later settle. It is not an added cost for the buyer: it is deducted from the price paid to the seller. Its purpose is to ensure that the tax authorities collect at least part of the tax due from someone living outside Spain.

The full sequence is as follows:

1. At signing, the buyer withholds 3% of the price stated in the deed.
2. The buyer has one month to pay it using form 211 and to hand the seller the copy evidencing the payment.
3. The seller files form 210 declaring the gain or loss, within three months from the end of that one-month period: four months from signing in total.
4. A non-resident's capital gain is taxed at 19%. If the resulting tax exceeds the 3% withheld, the seller pays the difference; if it is lower, or if there was a loss, the seller can claim a refund of the excess.

Where there are several buyers — a married couple acquiring 50% each, for instance — each files their own form 211 for their proportional share. There is no obligation to withhold if the seller provides a certificate of Spanish tax residence issued by the AEAT.

Which costs can be deducted to reduce the capital gain?

The taxable amount is not the gross difference between prices: costs and taxes paid on purchase are added to the acquisition value, and costs incurred on sale are deducted from the transfer value. Keeping the original invoices and deeds can reduce the tax bill substantially.

Added to the acquisition value:

• The ITP or VAT and stamp duty (AJD) paid on the original purchase.
• Notary fees and Land Registry charges from that transaction.
• Gestoría and legal fees linked to the acquisition.
• Investments and improvements made to the property, properly invoiced: an extension, the installation of a swimming pool, a full roof replacement or a complete rewiring. Ordinary maintenance and repair costs — repainting, replacing a faulty boiler — do not count.

Deducted from the transfer value:

• The municipal plusvalía paid by the seller.
• Estate agency fees.
• The cost of the energy performance certificate and the habitation certificate, where applicable.
• Registry costs for cancelling the mortgage.

Are there exemptions that allow the sale to go untaxed?

Yes. Spanish law provides for several cases of full or partial exemption, although almost all are reserved for Spanish tax residents and linked to the main home.

• Reinvestment in a main home: the gain is exempt if the proceeds are reinvested in the purchase of a new main home within two years, before or after the sale. Where reinvestment is partial, the exemption is proportional.
• Sellers over 65: the sale of a main home is fully exempt, with no reinvestment requirement.
• Life annuity: sellers over 65 disposing of a property that is not their main home may be exempt if they reinvest the proceeds in an insured life annuity, capped at €240,000, within the following six months.
• No increase in land value: for plusvalía purposes, the transaction is not liable if it can be shown that no revaluation occurred.

Tax residents of other European Union states, Iceland or Norway may claim the main-home reinvestment exemption on equivalent terms, provided the new main home is acquired in their state of residence and the general requirements are met.

Which deadlines apply after signing?

The deadlines are short and run from the date of the deed, not from the date the price is received. This is the timetable to keep in mind:

Late filing triggers surcharges of between 5% and 20% of the amount due, plus the corresponding late-payment interest.

Frequently asked questions

Who pays the municipal plusvalía in a sale in Menorca?

The seller pays it. The only exception is when the seller does not reside in Spain: in that case the buyer acts as substitute taxpayer and is liable to the town hall for the payment, although the cost can be passed back to the seller.

Can the 3% retention be recovered if the property is sold at a loss?

Yes. If the sale generates a capital loss, or the calculated tax is lower than the amount withheld, the seller can claim a refund of the excess by filing form 210 within four months of signing, attaching the receipt for form 211.

Are the municipal plusvalía and the capital gains tax the same thing?

No. They are separate taxes, paid to different authorities and calculated differently. The plusvalía is settled at the town hall and taxes only the land; the capital gain is declared to the state tax agency and taxes the difference between purchase and sale values. In addition, the plusvalía paid is a deductible cost when calculating the gain.

What rate applies to a non-resident seller's gain?

A flat rate of 19% on the capital gain, regardless of its size and of the seller's country of residence. Spanish tax residents, by contrast, are taxed on a progressive scale from 19% to 30%.

What documents should be gathered before putting a property on the market?

The purchase deed, receipts for the taxes and costs paid at the time, invoices for improvement works, the energy performance certificate, the latest IBI receipt, a zero-debt certificate from the owners' association and, if a mortgage is registered, a certificate of the outstanding balance or of its cancellation.

Conclusion

Selling well in Menorca is not only about getting the price right: it is also about anticipating the tax side of the transaction so that the true net proceeds are clear from the outset. The municipal plusvalía, the capital gain and — for foreign owners — the 3% retention are three obligations with short, non-extendable deadlines that are best resolved before sitting down at the notary's table.

At Fincas Venalis we guide Spanish and international owners through every stage of selling a property in Menorca, from the initial valuation and document preparation to the signing of the deed, coordinating with notaries and tax advisers so that each step is completed properly and on time. You can find out more about our services and our portfolio at https://venalismenorca.com/en/.