Inheritance Tax reliefs in the Balearic Islands
In the Balearic Islands, regional tax reliefs have significantly reduced the impact of Inheritance and Gift Tax on estates and succession agreements. Our work is to turn these rules into legal certainty, clear numbers and well-planned decisions for your family wealth.
What has changed in Inheritance Tax in the Balearic Islands
Recent regional reforms have introduced very substantial reliefs in Inheritance and Gift Tax (ISD) for recent tax events in the Balearic Islands. In practice, many inheritances between close relatives no longer bear an effective tax burden, but you are still required to file and to plan the operation properly.
- Inheritances and succession agreements (such as lifetime transfers, donations with definition, etc.) can benefit from the same reliefs if they are correctly structured.
- The relief is applied to the adjusted gross tax due, after applying the relevant reductions and multipliers.
- The tax event date (date of death or date of the succession agreement) is key to determining which specific set of rules applies.
Kinship groups and levels of relief
The starting point to assess whether an inheritance is effectively covered by tax reliefs is to identify the kinship group to which each heir belongs.
- Groups I and II: descendants, adopted children, ascendants, adoptive parents, spouses and, where applicable, recognised stable partners. For recent tax events in the Balearic Islands, the regional relief on the adjusted tax due reaches 100%, effectively neutralising the tax provided formal and substantive requirements are met.
- Group III: siblings, uncles, aunts, nephews and nieces and other second- and third-degree collateral relatives. They benefit from partial relief on the adjusted tax due, with higher percentages when there are no descendants of the deceased or they have been disinherited.
- Group IV and certain special cases: they do not have an equivalent general relief, so it is essential to consider other reductions or planning options.
ATIB, AEAT and non-residents: who collects the tax
Inheritance Tax is a state tax that is partially assigned to the Autonomous Communities. For inheritances of residents in the Balearic Islands, management and collection generally correspond to ATIB (Agència Tributària de les Illes Balears), applying Balearic regional rules.
When non-residents are involved (either the deceased or the heirs), the obligation to file the tax return may lie with the Spanish Tax Agency (AEAT), usually by means of Form 650 for non-residents, while in many cases still allowing the application of Balearic regional rules if the legal connection criteria and asset location requirements are met.
At Cantallops Legal we analyse whether the return must be filed with ATIB or AEAT and verify whether the Balearic regional reliefs can be applied to the maximum extent allowed by law.
Real estate and reference value: a key condition
In inheritances involving real estate located in the Balearic Islands, regional rules require that the declared value does not exceed certain thresholds in relation to the cadastral reference value or, failing that, the market value. Declaring values that are unjustifiably higher may put the relief at risk.
- We check the reference value of each property and its consistency with the current regional rules.
- We adjust estate planning so that the allocation of assets and valuations are consistent with the requirements for applying the reliefs.
- If there is no reference value, we assess a reasonable market value using legal and tax criteria.
Common mistakes in inheritances in the Balearic Islands
- Assuming that, because there is a “100% relief”, there is no need to file the tax return or that there is no sanction risk.
- Failing to check the tax event date and applying reliefs that were not yet in force at that time.
- Not coordinating Inheritance Tax with municipal capital gains tax and the planning of other taxes (personal income tax, wealth tax, etc.).
- Declaring property values that are incompatible with the thresholds required by regional rules in order to apply the reliefs.
- In cross-border estates, getting the competent authority wrong (ATIB versus AEAT) or misidentifying the applicable regional rules.
Our approach is preventive: structuring the estate, documenting decisions carefully and leaving a legal and tax file that is well prepared for the future.