First measures of the tax reform in the Balearic Islands:
Changes in inheritance and transfer of assets

After the regional elections, which meant a change in the Balearic government, where the Conservatives will govern in the minority and rely on the support of another right-wing party like VOX to govern, one of the first measures decided was the substantial change in the inheritance and gift tax and the transfer tax. These changes, passed on 18 July 2023, have important implications for both residents and non-residents of the Balearic Islands.

Originally, non-residents were exempt from the application of these new measures, but after learning about the text of the regulation and the possible lawsuits in the European Courts for discrimination, the Balearic Government has already expressed its intention to immediately amend the regulation so that it can be applied indiscriminately to both residents and non-residents.

The following new tax measures have been approved:
The payment of inheritance and gift tax between parents and children, grandparents and grandchildren, and spouses will be abolished. In the case of inheritance between siblings or between uncles and nephews and nieces, where the deceased person has no descendants, the reduction is 50%. If the deceased person has descendants, the reduction is 25%.
The reform applies both to inheritances on death and to inheritances under the so-called pactos sucesorios or inheritances during life under the civil law of the Balearic Islands.
However, in the case of an inheritance on death, the tax is only due on the day of the testator’s death. Therefore, this new taxation does not apply to inheritances of deceased persons before 18 July 2023.
The Decree-Law also provides for the complete abolition of the Income Tax on Property (ITP) on the acquisition of the first habitual residence for persons under 30 years of age and persons with a disability of at least 33%.
The tax rate is 2% if the acquirer is under 36 years of age and the property is the first residence acquired by him. In addition, the property acquired must be the habitual residence of the father, mother or parents living with the son, daughter or children under parental supervision and be members of a large family or a family with only one parent, provided that the purchase price of the property does not exceed 350,000 euros.
These tax reforms in the Balearic Islands represent a significant change in the tax structure of the community, and bear in mind that the Balearic government has announced that it will reduce property taxation, so we will have to watch out for changes in this regard. Although these measures may be beneficial to many residents and non-residents, it is important to inform yourself and seek professional advice to fully understand the implications of these changes.

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