Spanish Island Government slashes inheritance tax on property.

The government of the Balearic Islands have slashed inheritance tax on properties between 25% and 75%, which is likely to encourage buyers. Buyers were concerned before this announcement because of the huge bill they would pass onto their families when they passed away.

Properties with basic land value (catastral value) for home tax calculation purposes of €100,000 or less already get a 95% discount on inheritance tax.

Julio Martinez who is the regional government deputy president has said that until now, if the catastral value – which can never be more than 50% of the market value – exceeded 100,000 ‘by just one Euro’, the inheritor of the property would end up paying 100% of the inheritance tax, rather than the 5%. The deputy president has said that this is unfair and has introduced a sliding scale to soften the blow.

Homes with a catastral value of between 100,001Euros and 125,000Euros will have a reduction of 75% on inheritance tax paid by the deceased’s relatives, and properties between 125,001Euros and 150,000 will only pay 50%.A quarter of the inheritance tax will be discounted to properties with a basic land value
between 150,001 and 200,000 and any with a catastral figure above this would pay more.

Effectively, this means that inherited properties which have the full rate of tax will not be worth less than 400,000Euros if and when they are put up for sale. Typically, first and second time buyers, holiday homes, smaller detached properties and terraced houses that are bought by ex-pats are most likely to qualify for discounts. Even small to medium sized villas, along with large apartments are also likely to benefit from inheritance tax reductions.


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