On July 9th, the Balearic government approved the 2025 budget package. Among the measures adopted is an extension of tax benefits in inheritance tax, aimed at promoting equality within families and encouraging investment in the real estate market. This could result in substantial tax savings, especially in cases of inheritances from uncles, aunts, nephews, or siblings.

At the heart of the reform is the increase in deductions for beneficiaries in Group III — which includes siblings, uncles, aunts, nephews, sons-in-law, daughters-in-law, and stepchildren. If the deceased leaves no direct descendants, the deduction rises from 50% to 60% of the tax liability; if there are descendants, the benefit increases from 25% to 35%.

It is worth recalling that two years ago the Balearic government virtually eliminated the tax burden for Groups I and II (spouses, parents, and children). Non-residents were also subsequently included, significantly boosting the Balearic Islands’ popularity among foreign buyers.

This new measure is expected to benefit approximately 14. 000 inheritance cases per year and will result in a loss of public revenue of around 27 million euros. The government expects this shortfall to be offset by increased activity in the real estate market and by aligning the tax treatment of intra-family donations. Meanwhile, the left-wing opposition has criticized the measure as a “gift to large fortunes” and warned that the Balearic Islands “cannot afford to forego revenue” while housing and education challenges persist.

This reform continues the course set in 2023, when the tax burden for Groups I and II was nearly abolished. That reform resulted in a cumulative tax saving of nearly 200 million euros in its first year and sparked considerable interest among foreign buyers.

Non-residents who own property in the Balearic Islands should take note: since 2014, it has been possible to apply Balearic tax law without being a tax resident in Spain, provided that the majority of the inherited assets are located on the islands. Specifically, a nephew inheriting property worth €500,000 can deduct 60% and therefore pay inheritance tax only on a taxable amount of €200,000. Even if there are direct descendants, the 35% deduction remains significant. Before accepting an inheritance, it is advisable to assess whether a succession agreement or a lifetime donation might be more advantageous, as these alternatives now also benefit from the new deductions.

However, it is essential to consider the fine print: national tax law stipulates that inheritance tax must be paid within six months of the date of death (subject to extension). The tax authority also requires proof of the market value of properties, bank accounts, and vehicles. Those intending to sell inherited property must also take into account potential capital gains and the local capital appreciation tax (plusvalía municipal).

Therefore, advisors recommend preparing a detailed inventory of assets in advance, reviewing any wills with implications in Spain (e.g., drafted in Germany), and, if necessary, applying for a certificate of inheritance from the Directorate General for Legal Certainty and Public Trust – Dirección General de Seguridad Jurídica y Fe Pública.

This reform takes effect in the middle of the tourist season and conveys a dual message: the Balearic Islands remain an attractive destination for foreign investment and are relying on economic activity to offset declining tax revenues. Anyone planning to transfer property in Mallorca is advised to seek professional guidance — to ensure that an inheritance becomes an opportunity rather than a burden.