Dealing with Spanish inheritance tax can be overwhelming for many. To add to the complexity, many regional variations profoundly affect the amount of tax you may have to pay.
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1. Inheritance Law in Mallorca
Like other autonomous regions in Spain, the Balearic Islands have their own regulations regarding inheritance and gift tax. These rules apply equally to residents and non-residents who are EU citizens, following the European Court of Justice ruling and subsequent Spanish legislation.
2. Tax Exemptions and Deductions in Mallorca
The regional level exemptions available in Mallorca were brought into force by the Parliament of the Balearic Islands and in their current form are laid-out in Decree Law 1/2014, as modified by Law 11/2023.
3. Personal Deductions - What are Groups?
Spanish Inheritance law first assigns beneficiaries to groups according to the degree of kinship with the deceased:
- 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
4. Personal Deductions by Group
The following are the additional deductions available in Mallorca:
- Group I: €25,000, plus €6,250 for each year under 21, with a maximum limit of €50,000
- Group II: €25,000
- Group III: €8,000
- Group IV: €1,000
Note, when we speak of deductions, we mean that the amount you would be taxed on is deducted by a set percentage before applying the rate of tax. So, if you have inherited €100,000 and are entitled to a deduction of 95%, this means you will pay tax at whatever rate is appropriate to you - on €5,000 only.
On the other hand, when we speak of rebates, this is applied to the amount of tax you have to pay. So, if after applying any deductions you have to pay €1000 in inheritance tax, and you are entitled to a rebate of 99%, this would mean you would only have to pay €10.
5. Inheritance Tax Rates in Mallorca
| Base up to € | Base Tax € | Remaining Base up to € | Marginal Rate % |
| 0 | 0 | 8,000 | 7.65 |
| 8,000 | 612 | 8,000 | 8.50 |
| 16,000 | 1,292 | 8,000 | 9.35 |
| 24,000 | 2,040 | 8,000 | 10.20 |
| 32,000 | 2,856 | 8,000 | 11.05 |
| 40,000 | 3,740 | 8,000 | 11.90 |
| 48,000 | 4,692 | 8,000 | 12.75 |
| 56,000 | 5,712 | 8,000 | 13.60 |
| 64,000 | 6,800 | 8,000 | 14.45 |
| 72,000 | 7,956 | 8,000 | 15.30 |
| 80,000 | 9,180 | 40,000 | 16.15 |
| 120,000 | 15,640 | 40,000 | 18.70 |
| 160,000 | 23,120 | 80,000 | 21.25 |
| 240,000 | 40,120 | 160,000 | 25.50 |
| 400,000 | 80,920 | 400,000 | 29.75 |
| 800,000 | 199,920 | and above | 34.00 |
As an example, an inheritance of €20,000 (after all other deductions applied) would attract inheritance tax of €1,292 (tax applicable up to €16,000) + €4000 @ 9.35% = €1,666.
6. Special Tax Rates for Groups I & II
For children under the age of 21 and other children, spouse and parents of the deceased, the following rates apply:
| Base up to € | Base Tax € | Remaining Base up to € | Marginal Rate % |
| 0 | 0 | 700,000 | 1 |
| 700,000 | 7,000 | 300,000 | 8 |
| 1,000,000 | 31,000 | 1,000,000 | 11 |
| 2,000,000 | 141,000 | 1,000,000 | 15 |
| 3,000,000 | 291,000 | and above | 20 |
7. Existing Wealth Multipliers in Mallorca
In Spain, inheritance tax accrues to the individual beneficiary, and as a result, in order to calculate the inheritance tax payable, it is necessary to take into account the both the existing personal wealth of the beneficiary and the group of beneficiaries (as defined above) that they belong to. In Mallorca, the coefficients are as follows.
| Pre-existing Wealth € | Groups I & II | Group III (2nd & 3rd degree collateral by blood or affinity) | Group III (2nd & 3rd degree collateral by affinity) | Group IV |
| 0 to 400,000 | 1.0000 | 1.2706 | 1.6575 | 1.7000 |
| 400,000 to 2,000,000 | 1.0500 | 1.3341 | 1.7000 | 1.7850 |
| 2,000,000 to 4,000,000 | 1.1000 | 1.3977 | 1.7850 | 1.8700 |
| More than 4,000,000 | 1.2000 | 1.5247 | 1.9550 | 2.0400 |
To take the previous example of an inheritance of €20,000, if the beneficiary is the sibling of the deceased, with existing wealth (including all assets) of €1,000,000, then as a sibling they would be in Group 3 and with an existing wealth as stated, a multiplier of 1.3341 would be applied to the inheritance tax payable i.e. €1,666 x 1.3341 = €2,222.61.
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8. Inheritance Tax Rebates for close Family Members
As a result of Law 11/2023, children of any age, the spouse and the parents who inherit assets in Mallorca shall have a 100% rebate of any inheritance tax payable.
This rebate is reduced to 50% of any tax payable, where the beneficiary is a sibling or nephew/niece, by blood.
The rebate is further reduced to 25%, where the beneficiary is a 2nd or 3rd degree relation by affinity, e.g. the nephew or niece of the deceased's spouse.
9. Careful! Hidden Tax Trap: Why Tax Reductions Could Cost You More
When inheriting property in Spain, it's worth carefully considering whether to apply the available inheritance tax reductions (100% or 50%) that are normally available to direct family members like parents, children, aunts, and nephews - especially if the inheritance tax amount is relatively modest. Here's why:
If you're a non-resident planning to sell the inherited property later, the capital gains tax (fixed at 19% for non-resident EU Citizens and 24% for all other non-residents) could potentially result in a higher tax burden than what you would have paid in inheritance tax without the reductions.
For example:
Consider a situation where a child inherits an apartment with a tax reference value of €200,000 (note that this is not necessarily the market value).
If they apply the 100% inheritance tax reduction, they pay no inheritance tax. However, if they later sell the property for its real market value of €300,000, they would need to pay 19%/24% capital gains tax on the €100,000 difference (€19,000 - €24,000). This capital gains tax amount could be significantly higher than what they would have paid in inheritance tax on the original €200,000 value without applying the full reduction.
This is particularly relevant for non-resident inheritors who plan to sell the property rather than keep it. We recommend discussing your specific situation with a qualified tax advisor to determine the most advantageous approach for your circumstances.
10. Deductions for the Disabled
The Balearic Islands offer specific deductions for disabled beneficiaries:
- €48,000 for those with a physical or sensory disability between 33% and 65%
- €300,000 for those with a physical or sensory disability of 65% or more, or a mental disability of 33% or more
11. Inheritance of the Family Home
A 100% reduction applies to the acquisition of the main residence, with a limit of €270,151.20 per beneficiary provided that:
- The beneficiaries are spouse, ascendants, descendants, or relatives over 65 who lived with the deceased for the two years before death
- The property must be maintained for 5 years following the acquisition
- The requirement of cohabitation only applies to collateral relatives over 65 years
12. Business Assets and Professional Activities
There is a 95% reduction applied to the acquisition of an individual business, professional practice, or shares in companies when:
- The exemption requirements of Wealth Tax are met
- Assets must be maintained for 5 years
- Where there are no descendants, ascendants and collateral relatives up to the third degree may apply the reduction
13. Cultural Heritage Assets
- 99% reduction for entities involved in cultural or sports patronage
- 95% reduction for assets of cultural interest acquired by spouse or descendants
14. Vehicle Reductions
- 50% for zero-emission vehicles
- 25% for ECO-classified vehicles
15. Life Insurance Policies
- 100% reduction on amounts received by beneficiaries of life insurance policies, with a limit of €12,000
- This applies when beneficiaries are spouse, ascendants or descendants
- The same deduction applies to amounts received from life insurance that accrues in acts of terrorism and from public services provided in international humanitarian or peace missions
16. Additional Special Features
Double Transmission Reduction: When the same assets are transmitted twice or more within 12 years to descendants, a reduction applies based on the tax paid in previous transmissions.
17. Inheritance of Foreign Assets by Tax Residents of Mallorca
Foreign nationals who are tax resident in the Balearic Islands must comply with Spanish inheritance tax obligations when inheriting assets located abroad. This is particularly important for the significant expatriate population in Mallorca.
When dealing with such inheritances, it's crucial to apply the Balearic Islands' regional deductions rather than the state-level regulations. The difference in tax liability can be substantial, especially when dealing with the inheritance of foreign property. For example, the generous reductions available for main residences under Balearic law could potentially apply to a family home inherited abroad.
For assets located in countries with existing Double Taxation Treaties with Spain (such as France, Sweden, and Greece), special rules apply. These treaties determine which country has primary taxing rights and how double taxation is avoided.
An important administrative requirement is that any inherited foreign assets must be declared on Spain's Form 720 (foreign asset declaration) following the transfer of ownership. This obligation exists independently of any inheritance tax requirements and carries significant penalties for non-compliance.
Given the complexity of cross-border inheritance, professional advice is strongly recommended when dealing with foreign assets, particularly regarding the interaction between Balearic regional deductions and international tax treaties.
18. Processing an inheritance in Mallorca
As a beneficiary of an inheritance in Mallorca, you will need to take some or all of the following steps in order to process an inheritance. Given the complexity and potential taxes and fines if not processed correctly, it is highly advisable to contact a specialist in probate law for assistance:
- Obtain the Death Certificate
- Secure the Certificate of Last Wills
- Locate the Will
- Gather Necessary Documentation
- Obtain the NIE Number for Heirs
- Assess Applicable Inheritance Law
- Prepare the Inheritance Deed
- Pay Inheritance Taxes
- Settle the Plusvalía Tax
- Register the Asset Transfer
19. Gift Tax Planning in Mallorca
Many families with assets in the Balearic Islands consider making lifetime gifts rather than waiting for assets to pass through inheritance, particularly regarding property transfers. This strategy requires careful consideration, as the advantages and disadvantages can vary significantly depending on individual circumstances and the type of assets involved.
Firstly, it should be taken into consideration that gifts in Mallorca are also subject to tax, as follows:
| Base up to € | Base Tax € | Remaining Base up to € | Marginal Rate % |
| 0 | 0 | 200,000 | 5 |
| 200,000 | 10,000 | 600,000 | 7 |
| 600,000 | 38,000 | remainder | 9 |
Tax Payment Requirements:
- Gift tax must be paid within one month of the gift's formalization
- Documentation must be properly registered within this timeframe
Additional Tax Implications: When gifting property in the Balearic Islands, donors and recipients should be aware that Plus Valía tax will also apply. This municipal tax is levied on the increase in value of urban land since the property was last transferred. The calculation varies by municipality:
- Based on the property's catastral value
- Applies local coefficients and rates
- Must be paid at the time of the gift
- Rates vary between Balearic municipalities
Given these multiple tax implications and strict compliance deadlines, professional advice should be sought before proceeding with any significant gifts, particularly those involving real estate. The interaction between gift tax reductions and other local taxes can significantly impact the overall tax efficiency of the transaction.
