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Balearic Islands to suppress Inheritance Tax

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Lawyer Raymundo Larrain briefly explains the (groundbreaking) changes in inheritance tax in the Balearic Islands.

In a dashing move, the newly appointed regional government in the Balearic Islands approved on Tuesday 18th of July to suppress inheritance tax from parents to children (Groups I & II). This still needs to be ratified by the regional parliament as a mere formality to be enacted (likely within the next 30 days).

In Spain, beneficiaries are classified in four different groups depending on their kinship with the deceased. As a general rule, the closer the kinship, the more lenient the tax allowance.

Group I: Natural and adopted children under 21.

Group II: Natural and adopted children over 21, spouse, registered civil partnerships, parents, adoptive parents, grandparents, and great-grandparents.

Group III: Relatives in second and third degree: in-laws, brothers/sisters (siblings), nephews/nieces, aunts and uncles.

Group IV: Relatives in fourth degree, or without any relationship: a friend, common law partners.

You can expect these tax breaks to be expanded, and improved upon, over the next years in the Balearic Islands to include Group III, in line with what’s already been approved in other regions of Spain with similar tax-friendly laws.

This trend follows on the back of other Spanish regions which have also suppressed IHT over the years to much success, such as:

  • Andalusia
  • Madrid
  • Cantabria
  • Castilla y Leon
  • Extremadura
  • Murcia
  • Valencia *

*to be approved shortly

Property Transfer Tax also reduced!

The Balearic Islands new government additionally has also significantly reduced Property Transfer Tax; to the point it has suppressed it altogether in some cases, if a buyer meets certain criteria.

Needless to say, this is great news for everyone. As we’ve been banging on for years, reducing taxation is the right path to get out of the woods. Low taxation fosters foreign investments, which kickstarts a sluggish economy, creating jobs, and wealth on its wake.

High taxes only benefit politicians and their cronies.

That’s great news, but I’m a British national (or from outside the EU), this tax change surely doesn’t benefit me

Actually, it does!

Although Brexit is undoubtedly an unmitigated disaster, the good part is that our nice EU Overlords have ruled that ALL non-EUs must also benefit from regional tax allowances (such as this new one from the Balearic Islands) in line with the core tenements that behove the Union.

Bottom line, if you are British, this tax change favours you. Same goes for our American cousins, Canadians, South Africans, Australians, New Zealanders, etc basically anyone who wasn’t lucky enough to be born in the light of the Union; nobody is perfect. 😊

And for those brave souls that wish to delve deeper on this arid tax topic: Inheritance tax in Spain: regional tax reliefs to benefit ALL non-residents in the future (even outwith EU/EEA) – 29th July 2019

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Marbella-based Larraín Nesbitt Abogados (LNA) has over 20 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

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Alexander III of Macedon (21st of July 356 BC – 11th of June 323 BC).

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