Balearic Islands Abolish Inheritance Tax

The Balearic government has put an end to inheritance tax payments, it was announced on Tuesday, July 18.

Inheritance and gift tax donations between parents and children, grandchildren and grandparents and between spouses, both due to death and in inheritances during life through succession agreements are included in the move.

The government has also reduced the property transfer tax on the purchase of first homes for young people, and for people with disabilities.

“It is urgent to lower taxes on families”, stated the head of the executive and leader of the PP of the islands, Marga Prohens.

Prohens convened an extraordinary government meeting to approve by law the elimination of “the most unfair tax there is, which taxes the work and effort of parents and grandparents”.

The measure will mean inheritance tax savings of around €60 million.

The tax reform, which will not have a retroactive effect, has been approved via Decree Law that will have to be validated within the next 30 days by Parliament. The law represents the fulfilment of Prohens promise that before the end of July she would have adopted the main initiative of tax reforms, which she said will broaden and continue.

The tax changes, Prohens detailed, apply both to inheritances due to death and to succession agreements or “living inheritances”, which have their own regulation in Balearic civil law.

The same decree has included the elimination of the property transfer tax for the purchase of a first home by people under 30 years of age and people with disabilities, with an annual income limit of €52,800 in an individual situation or €84,480 jointly, and provided that the sale price does not exceed €270,151.

This tax is reduced by half for the purchase of a habitual residence by people between 31 and 35 years of age, large or single-parent families and families with disabled dependants , when the house does not cost more than €270,151 (€350,000 in the case of large families).

Prohens explained that this will mean a decrease in income of about €75 million (€60 million for inheritance tax and €15 million for property transfer tax).

“This reduction in income will not mean a reduction in the provision of public services. There is more than enough room to lower taxes and to maintain and improve public services”, said Prohens.