Inheritance Tax on Mallorca: What Heirs Pay in the Balearics

Inheritance tax on Mallorca and the rest of the Balearics is a pleasant surprise for many foreign residents and property owners: spouses, children and parents have inherited practically tax-free here since 2023. Still, there are conditions, deadlines and pitfalls you should know about - especially as a non-resident, as an unmarried partner, or if you are also liable to inheritance or estate tax in your home country. This article explains how the Balearic rules work, what has applied to gifts since July 2025, and what couples and families should sort out in advance.

How Inheritance Tax Works in the Balearics

Spain's inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones, ISD) is a national tax whose design has largely been handed over to the regions. The Balearics set their own allowances and rebates, which is why heirs are far better off here than in many other parts of Spain.

The legal basis is the national inheritance tax law Ley 29/1987, which sorts heirs into four tax groups:

• Group I: children and grandchildren under 21
• Group II: children and grandchildren 21 or older, spouses, parents and grandparents
• Group III: siblings, nieces and nephews, parents-in-law and children-in-law
• Group IV: more distant relatives and non-relatives, including unregistered partners

Without the rebate, the rate ranges from 7.65 to 34 percent depending on the value of the inheritance, plus multipliers based on the family relationship and the heir's pre-existing wealth. That is exactly why the group classification matters so much.

The 100 Percent Rebate: Who Inherits Tax-Free in the Balearics

Since 18 July 2023 the Balearics apply a 100 percent rebate on inheritance tax for Groups I and II (Decreto-ley 4/2023). Spouses, children, grandchildren and parents therefore pay 0 EUR of inheritance tax, regardless of the size of the estate.

Group III gets a tiered relief: a 50 percent rebate if the deceased had no descendants, otherwise 25 percent. Group IV gets nothing and pays the full rate.

Two conditions are worth knowing:

1. Property valuation: For inherited real estate, the declared value must not exceed the official reference value (valor de referencia) of the land registry. If no reference value exists, the provable market value applies.
2. Filing obligation: The rebate only removes the payment, not the tax return. The Modelo 650 must be filed with the Balearic tax authority ATIB within 6 months of the date of death. An extension by another 6 months is possible if you request it within the first 5 months.

Gift Tax: Also Down to Zero Since July 2025

For a long time the tax break only applied on death. With the Balearic budget law (Ley 6/2025), the 100 percent rebate was extended to gifts between Groups I and II as of 25 July 2025. Parents can therefore transfer money or a property on Mallorca to their children during their lifetime without Balearic gift tax.

The conditions here are stricter than for inheritances:

• The gift must be recorded in a notarial deed (escritura publica). Private agreements are not enough.
• For gifts of money, the origin of the funds must be documented in the deed.
• For real estate, the cap at the official reference value applies again.
• Here too, the self-assessment (Modelo 651) remains mandatory, even if the result is 0 EUR.

Important for the person making the gift: if you give away a property, you may have to pay Spanish income tax on a deemed capital gain. The recipient's gift tax is only half the story. Have a transfer like this calculated in advance by a tax advisor or a lawyer - our guide to finding a lawyer on Mallorca explains where to start.

Non-Residents: EU Law and Your Home Country's Tax

Are you inheriting a property on Mallorca while living abroad? Then you have limited tax liability in Spain. Since the ruling of the European Court of Justice of 3 September 2014 (case C-127/12), non-residents may also apply the regional benefits, and Spanish courts have since extended this to residents of non-EU countries as well. As a child or spouse you therefore benefit from the Balearic 100 percent rebate even from abroad; the case is then handled by the national Agencia Tributaria instead of the ATIB.

That does not settle the matter, though. Your home country may tax the same inheritance under its own rules: the United Kingdom levies inheritance tax on the worldwide estate of UK-domiciled persons, the United States applies the federal estate tax to the worldwide assets of US citizens, and Germany taxes the worldwide acquisition if the heir or the deceased lived there. Many countries credit foreign inheritance tax actually paid, but since close relatives usually pay 0 EUR in the Balearics, there is often simply nothing to credit. Get advice covering both countries before you file anywhere.

Where you are tax resident decides the whole case. How Spain determines tax residency is explained in our guide to tax residency on Mallorca.

What Couples and Families Should Sort Out in Advance

The current rules are generous, but they are a political choice and can change again with a new regional government. A few things are worth doing regardless:

• Make a Spanish will: It speeds up the process enormously and usually costs less than 100 EUR at the notary.
• Choose your applicable law: Under the EU Succession Regulation, foreign nationals can choose the inheritance law of their nationality in their will. Without a choice, the law of your habitual residence applies.
• Register your partnership: Unmarried couples should look into registering as a pareja estable or getting married, otherwise Group IV looms.
• Watch the deadlines: The 6 months for the Modelo 650 pass quickly, especially when documents have to be obtained from abroad and translated. Start collecting death certificates, property deeds and bank statements early.

Do I still have to file a tax return despite the 100 percent rebate? Yes. The rebate removes the payment, not the filing obligation. The Modelo 650 (inheritance) or 651 (gift) must be filed with the ATIB on time, even if the tax comes to 0 EUR.

Does the tax exemption also apply to siblings? Only partially. Siblings belong to Group III and receive a 50 percent rebate if the deceased had no descendants, otherwise 25 percent. They do not inherit tax-free like spouses and children.

Conclusion

Inheritance tax on Mallorca has in effect been abolished for spouses, children and parents thanks to the 100 percent rebate, and since 25 July 2025 the same goes for notarised gifts. That is no reason to skip the homework: the filing obligation remains, properties must be valued correctly, unmarried partners need a registration or a marriage, and anyone living abroad must look at their home country's inheritance or estate tax separately. With a Spanish will and a clean choice of applicable law, you are well prepared for the worst case. If you need professional help, start with our guide to finding a lawyer on Mallorca.