Inheritance Tax DeductionsIn the Balearic Islands

This presentation has been updated and is valid for 2014.

Inheritance Law in Balearic Islands

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There are special regional tax deductions and exemptions

passed by the local government in the Balearic Islands that

only apply to those beneficiaries who have been resident in

the region.

Inheritance Law in the Balearic Islands

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If you have NOT been resident in the Balearic Islands then,

when determining your inheritance tax liability, you may only

apply the deductions and exemptions approved by the

CENTRAL government.

Inheritance Law in the Balearic Islands

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The central government exemptions and deductions are not

as generous as the regional exemptions.

This has caused complaints that the inheritance tax laws in

Spain are discriminatory against non-residents.

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Inheritance Law in the Balearic Islands

The regional level deductions available in the Balearic

Islands were enacted by the parliament in Palma and in their

current form are specified in Law 22/2006.

Inheritance Tax Laws in the Balearic Islands

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All deductions, discounts and tariffs that apply to those who

are married will be applied to those who, although unmarried,

are registered as ‘established couples’ as per Ley 18/2001.

Inheritance Tax Laws in the Balearic Islands

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Personal Deduction Due to Kinship with Deceased

Personal deductions are applied according to group classification:

Group I Children, including adopted children, under the age of 21

Group II All other descendants, spouses and parents

Group III Close relatives such as brothers and sisters, grandparents,

aunts and uncles

Group IV More distant relatives

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The following are the personal exemptions available in the Balearic Islands:

Group I Deduction of €25,000 plus €6,250 per year under the age of 21 up to a maximum of €50,000

Group II Deduction of €25,000

Group III Deduction of €8,000

Group IV Deduction of €1,000

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If the beneficiary is physically disabled:

An exemption of €48,000 in addition to any personal

deductions if disability of a degree > 33% and < 66%

If the disability is > 66% then the additional discount

increased to €300,000

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If the beneficiary is mentally disabled:

If the disability is a mental disability > 33% an additional

deduction of €300,000 may be applied

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Deductions in transfer of Family Business

• Tax deduction of 95% of the value of the business

• Must be children or spouse to benefit.

• Only if no child or spouse, any relative 'to third degree of

consanguinity' may benefit from exemption

• The business may not be sold within a period of 5 years

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Inheritance of the Family Home

The spouse, descendants, parents or any elderly relative

who has lived with the deceased for two years prior to

their death may deduct 100% of the value of the main

family home up to a value of €180,000 each as

beneficiaries

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Inheritance of the Family Home

The property may not be sold for a period of 5 years after

the inheritance. The main family home is as defined for

the purposes of legislation dealing with income tax.

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Tax deductions on income from Life Insurance:

Where the beneficiary is a spouse, descendant or parent then a

deduction may be made of 100% up to €12,000 of any income

derived from a life insurance policy held by the deceased.

There is no limit to the exemption if death was caused by an act

of terrorism.

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Special discounts

Where the beneficiary is a natural or adopted child, there is a

99% discount applied to any tax payable under the preceding

rules

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Other Deductions:

As a general rule the following deductions may be made on any estate:

Funeral Expenses

Final Medical Expenses of the Deceased

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Other Deductions cntd:

Debts held be the deceased that are evidenced by public

documents e.g. a mortgage

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Once the final amount of tax payable is determined then it is necessary to apply the relevant rate.

Tax Rates in The Balearic Islands

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Tax Rates in The Balearic Islands

Taxable Sum Tax Payable On This Sum

Any Remainder

Up To

Applicable Rate on

Remainder (%)

0   8000 7,65

8000 612 8000 8,5

16000 1292 8000 9,35

24000 2040 8000 10,2

32000 2856 8000 11,05

40000 3740 8000 11,9

48000 4692 8000 12,75

56000 5712 8000 13,6

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Tax Rates in The Balearic Islands

Taxable Sum Tax Payable On This Sum

Any Remainder

Up To

Applicable Rate on

Remainder (%)

64000 6800 8000 14,45

72000 7956 8000 15,3

80000 9180 40000 16,15

120000 15640 40000 18,7

160000 23120 80000 21,25

240000 40120 160000 25,5

400000 80920 400000 29,75

800000 199920 And above 3421

Existing Wealth

Once the relevant tax rate has been applied the result is multiplied by a coefficient determined by the existing wealth of the beneficiary as well as the group to which they belong:

Group

Existing Wealth (€)

I & II III IV

0 to 400,000 1 1.5882 2

400,000 to 2,000,000 1.05 1.6676 2.1

2,000,000 to 4,000,000 1.1 1.7471 2.2

More than 4,000,000 1.2 1.9059 2.4

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Existing Wealth

The Groups referred to signify the following beneficiaries:

Group I Children, including adopted children, under the age of 21

Group II All other descendants, spouses and parents

Group III Close relatives such as brothers and sisters, grandparents,

aunts and uncles

Group IV More distant relatives

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Each year in Spain thousands of expats pay more

tax on inheritance than they should – simply

because they fail to follow some simple rules.

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To find out where to get expert advice, in English, about how

to reduce your liability for inheritance tax, go to:

Expert Probate Services in the Balearic Islands

Expert Probate Services in the Balearics

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