The Parliament of the Balearic Islands recently approved a new tax law that grants non-residents significant advantages in inheritance and gift tax (ISD). This measure, which represents a major change in tax policy, aims to promote fairness in the application of the tax for residents and non-residents alike.
The new tax regime introduces a 100% ISD rebate between parents and children and between grandparents and grandchildren and spouses. As a gesture of consideration for the family unit, a 50% reduction in this tax has also been provided for between siblings, uncles, aunts and nephews if there are no direct descendants who can benefit from the full reduction, or 25% if there are direct descendants.
This new legal reform also brings good news for those who wish to make a gift of property to their descendants in the Balearic Islands, as the tax burden on the transfer of property that is to be the beneficiary’s first main residence will be waived if the beneficiary is a child or direct descendant of the donor. In cases where the recipient of the gift is part of a large family or has a physical disability of 65% or more or a recognised mental disability of 33% or more, it is not necessary for the property to constitute the first habitual residence.
Furthermore, this new regulation applies retroactively from 18 July, when Decree 4/2023 came into force, which excluded non-residents as possible beneficiaries. This means that even if the self-assessment was submitted under the old rules, it is possible to claim the application of these new rules, which are more favourable for non-resident taxpayers, as stated in the new decree-law (“If the tax benefit has been improved by the final wording, the correction of the self-assessment may be requested”).

Under this new law, they can increase the cadastral reference value of properties by up to 20%, which counterbalances the artificial increase in valuation that often results in a higher income tax burden.
Before applying the new law, it is strongly recommended that a comprehensive tax study is carried out to determine what is best for the taxpayer, as in many cases it may be in the taxpayer’s interest to waive the free inheritance tax (ISD) and sell the house at market value. Even if ISD is paid at 1%, the future tax saving may be greater as there is no gain when the property is sold at market value and IRNR does not have to be paid.
It is important to emphasise that non-resident beneficiaries have a period of six months from the date of death to file the inheritance tax return. This timeframe must be taken into account in order to properly organise all the legally required documentation for the inheritance (death certificates, wills, insurance contracts, title deeds, valuations of real and personal property, etc.).
For non-residents, this change in the law represents an opportunity to plan and manage their assets more efficiently and to take advantage of the new tax conditions to optimise their tax burden. It is a clear sign that the Balearic Islands are opening their doors to investment and adopting an inclusive attitude towards non-residents.
It is highly advisable that before making an inheritance or gift under the new regulations, taxpayers carry out a prior tax study on the appropriateness or otherwise of the new rules and it is always advisable to seek good professional advice.