The decision to move to the Balearic Islands is often driven by a desire to enjoy its quality of life, favorable climate, and exceptional environment. However, after the excitement of relocating and settling into a new home, new residents—particularly those from German-speaking countries—are faced with an unavoidable reality: their first year as tax residents. This period is critical, as it marks the beginning of a series of obligations which, if not proactively managed, can turn the Mediterranean dream into a bureaucratic nightmare.

The first cultural shock is the rigidity of the Spanish tax calendar. Whereas in countries such as Germany taxpayers may have up to 20 months to file their income tax returns, Spain offers no such flexibility. Deadlines are strict and extensions are not permitted. Failure to file by the due date results in immediate penalties. This fundamental difference makes tax planning not just advisable but essential to avoid unpleasant surprises from the outset.

The fiscal calendar for new residents begins much earlier than most anticipate. Following the Christmas holidays, the ETE declaration must be submitted to the Bank of Spain. By January 20, residents with foreign balances exceeding one million euros must report this statistical information, detailing their assets and liabilities.

Barely recovered from this requirement, March brings the obligation to submit Form 720, along with its newer counterpart for cryptocurrencies, Form 721. Historically, this declaration of foreign-held assets has caused considerable anxiety due to a sanction regime that the Court of Justice of the European Union forced Spain to moderate, deeming it disproportionate. Although the penalties are no longer confiscatory, experts warn that failing to file or submitting inaccurate information—such as the precise date of opening old bank accounts—continues to pose a real risk and demands meticulous documentation, which can be difficult to gather on short notice.

The season culminates between April and June with the main declarations: Income Tax (IRPF) and Wealth Tax. At this stage, the self-assessment principle in Spain becomes particularly relevant: the Tax Agency does not issue a draft nor send reminders. It is the taxpayer’s responsibility to calculate and submit their returns proactively. Moreover, international information exchange is increasingly automatic and comprehensive, making it unwise to assume that foreign assets might go unnoticed by the authorities.

Given the complexity of these procedures and the strict nature of the deadlines, improvisation is not an option. If this is your first year as a tax resident in the Balearic Islands, we strongly recommend contacting a local tax advisor with international expertise without delay, to review your global financial situation before the end of the year. This will help ensure a smooth and trouble-free transition.