Gift or inherit

Gifting or bequeathing — which is cheaper in Mallorca?

For a Mallorca property that has increased in value, bequeathing it to your children can be cheaper: a gift generally triggers Spanish income tax on your gain for you, whereas an inheritance does not. The full Balearic relief for both routes under inheritance and gift tax, provided the legal requirements are met, therefore does not mean an equal overall burden. Deed value, municipal tax and German tax law can further change the outcome.

How the calculation works

The calculator sets a gift and a hypothetical inheritance side by side on the same reference date. It concerns a Mallorca property acquired for consideration that passes free of encumbrances, in full ownership and in one go to a single person. Earlier acquisitions from the same person, additional transferred assets, and a split between several children are not covered. The comparison does not predict future property values or changes in the law.

Both columns show the Spanish inheritance and gift tax (ISD), the income tax on the gain for the transferor, and the plusvalía (the municipality's capital-gain tax). If unlimited German tax liability applies, German tax and the crediting of the Spanish acquisition tax under § 21 ErbStG are added. Income tax and plusvalía are not credited in that case. You see the total burden, as well as separately what you and the recipient each bear. The after-tax asset value deducts the burdens on both persons from the property value.

Replace the pre-filled example assumptions with your own figures. The property value entered is applied equally for Spain and Germany, even though the Spanish tax reference value and the German gemeiner Wert (fair market value) under § 12 Abs. 7 ErbStG in conjunction with § 31 BewG may differ from each other. The municipal component assumes urban land. Special reliefs for disability, main residence or family home, the German Erbfallkostenpauschale (flat-rate estate cost allowance), the Versorgungsfreibetrag (maintenance allowance) and ancillary estate costs are not included — what the notary, land registry, lawyer and certified translation cost, you calculate separately. The gain tax calculation also assumes that you have not already used up a relief for old acquisitions elsewhere, and that, in the case of Spanish tax residency, no further taxable capital income or capital gains arise.

Gain tax for the transferor

Gift: Your taxable gain generally results from the transfer value less the original purchase price, the creditable purchase-related costs and value-enhancing investments. You may owe income tax on this even though you receive no purchase price. For those resident in Spain, this is the IRPF (income tax for residents); for those resident in Germany, it is the IRNR (income tax for non-residents). The Spanish income tax act (LIRPF, Ley 35/2006) excludes a loss arising from the gift under Art. 33.5.c from the deduction.

Inheritance case: Art. 33.3.b LIRPF excludes gratuitous transfers upon death from the calculation of gains. Therefore, no capital gains tax is charged to the transferor on the value increase accrued up to that point. For properties held for a long time, this can represent the largest single difference.

Deed value and fallback rule

The escritura pública — the notarial deed — must state the property value. The declared value may not exceed the Valor de referencia (the cadastral reference value) by more than one fifth. If no certifiable reference value exists, the market value is decisive. This condition applies to both routes: according to Art. 54.3 for gifts and according to Art. 36.2 or Art. 36 bis.2 for inheritance cases in the Decreto Legislativo 1/2014 (the Balearic legislative decree on transferred taxes).

Gift: If the condition is not met, Groups I and II retain the fallback rule under Art. 54.3. It caps the burden via a deduction formula; it is not a general gift tax rate. Inheritance case: The bonificación (tax relief) lapses without a corresponding fallback rule. In that case, the regular progressive rate applies, taking the remaining deductions into account. The difference thus lies in the consequence of a breached condition.

Relief on the municipal tax

Gift: The relief for inheritance cases does not apply here. Inheritance case: The municipality may grant relief to close relatives under Art. 108.4 of the Spanish Local Finance Act (TRLRHL). Whether and under what conditions it does so depends on its own bylaws. Therefore, select the municipality of your property in the calculator.

On both routes, the party liable for the tax is the acquiring person, i.e. the child who receives the gift or inheritance (Art. 106.1.a TRLRHL). A consistent payment obligation does not necessarily mean an equal tax amount. If the calculator marks the municipal tax or the total sum as a cap or as incomplete, this limitation is part of the comparison.

German tax class and reusable allowance

Gift: If you transfer to your parents or grandparents, they fall under German tax class II. Inheritance case:They belong to Tax Class I, because § 15 para. 1, Tax Class I No. 4 ErbStG expressly favours parents and grandparents only "on acquisitions by reason of death". This also changes the personal allowance under § 16 ErbStG. Children remain in Tax Class I on both paths.

One point speaks in favour of early gifting: the personal allowance under § 16 can be used again after ten years have elapsed, because § 14 ErbStG only aggregates earlier acquisitions from the same person within this period. This opens up a possibility for long-term planning. However, the calculator evaluates a single transfer; it does not calculate gifts made in stages nor any savings achieved through repeated allowances.

Worked examples

Your child receives a property that has risen in value

Start with the pre-set assumptions and the fulfilled deed-value condition. The Spanish acquisition tax is fully relieved on both paths. In the gift column, however, you see the capital gains tax on your side. Then compare the municipal tax and the German tax after crediting: only the sum of these answers your question.

The deed value falls outside the condition

In the same case, change only the answer to the deed-value condition. Now the gift column shows the fallback rule, while the inheritance column loses its tax relief. The new difference shows you how strongly this point affects your comparison.

You transfer to a parent

Choose a parent as recipient and leave German tax liability switched on. The result columns show different tax classes. This lets you see how the direction of the transfer affects the German tax burden.

Your sister or brother is to acquire

Choose siblings and change the information on whether descendants also inherit in the event of death. This affects the Balearic inheritance relief. Depending on the other inputs, this can even change which path is more favourable overall. So the answer for children cannot be transferred to every degree of kinship.

Special cases

Balearic inheritance contract with transfer during lifetime

A pacto sucesorio (Balearic inheritance contract) can transfer ownership already during the donor's lifetime and still be taxed in Spain as an acquisition by reason of death. With such an arrangement being effective, no capital gains tax arises for the transferor under Art. 33.3.b LIRPF. Art. 36.1 and Art. 36 bis.1 DL 1/2014 expressly include these contracts: "incluidos los pactos sucesorios", i.e. including inheritance contracts.

Be careful when reading older guides: Art. 50 and 51 of the Compilación (compilation of Balearic civil law) in Decreto Legislativo 79/1990 were repealed with effect from 17.01.2023. This is determined by the disposición derogatoria única (sole repealing provision) of Ley 8/2022. This matter is regulated today in this law. Whether you can use this arrangement and how Germany classifies the acquisition requires separate examination. The calculator does not cover inheritance contracts; read about that in how an anticipated succession works in the Balearics.

Resale following the inheritance contract

The advantage regarding acquisition values is tied to a holding period. If your child sells before five years have passed since the conclusion of the inheritance contract, and still before your death, they take over, under Art. 36 Abs. 2 LIRPF, your acquisition value and your acquisition date, if your value is lower than the otherwise applicable acquisition value. If you die earlier, this binding period ends with your death. An early sale can therefore make the old increase in value tax-effective for the child.

You retain the usufruct for yourself

If you transfer ownership but wish to continue using the property or keep its rental income, this calculator does not cover your case. The Spanish valuation would be calculable under Art. 26.a of the Spanish Inheritance and Gift Tax Act (LISD, Ley 29/1987). For the German valuation, § 14 Abs. 1 BewG refers to the multipliers of the Federal Ministry of Finance. These cannot be sufficiently substantiated from the sources approved by mallorca.com. Therefore, the reservation of usufruct is excluded. Simply entering a lower property value does not represent it.

Transfer to stepchildren

Stepchildren are likewise excluded. Under Art. 20.2 Ley 29/1987, they belong in Spain to Group III through affinity. The jointly used inheritance-case calculation currently classifies them differently. To avoid creating a false distinction between gift and inheritance as a result, this comparison does not offer stepchildren as a selectable option. The “child” setting does not fit this case.

Deadlines and forms

Even with full tax relief, the Spanish obligation to file a declaration remains. Jurisdiction and deadlines depend on the specific acquisition; the comparison calculator does not determine personal filing dates.

Gift tax: The Modelo 651 (Spanish gift tax declaration) is submitted to the AEAT (Spanish state tax administration) if the child is resident in Germany. The state filing deadline is thirty working days from the day after the gift. If the ATIB (Balearic tax administration) has jurisdiction, under Art. 90.2 DL 1/2014 a period of one month from the gift generally applies, or one month and ten calendar days for electronic filing and payment. Balearic tax benefits alone do not make the ATIB responsible.

Inheritance tax: For the Modelo 650 (Spanish inheritance tax declaration), a period of six months from the date of death generally applies. An extension of a further six months must be requested within the first five months; it may trigger late-payment interest. If the deceased was, or the heir is, not resident in Spain, the AEAT has jurisdiction. Its Notes on jurisdiction and extension of deadlines help with classification.

Capital gains tax of the donor: As an owner resident in Germany, you declare a taxable gain using Modelo 210 (Spanish income tax return for non-residents). For property transfers, the AEAT specifies a deadline of three months after one month has elapsed since the transfer. This declaration applies to you in addition to your child's gift tax declaration.

Municipality: The Plusvalía is declared separately. Art. 110.2 TRLRHL specifies thirty working days for gifts, six months for inheritances, and an extension of up to one year upon request. The form and procedure depend on the responsible municipality.

Germany: If subject to German tax liability, the recipient must generally notify the responsible tax office in writing of the acquisition within three months of becoming aware of it; for gifts, this obligation also applies to you as the donor (§ 30 ErbStG). A tax return follows upon request pursuant to § 31 ErbStG. For the requested credit of the Spanish acquisition tax, you will need its assessment and proof of payment.

Legal basis and status

Since 25.07.2025, acquisitions in Groups I and II in the Balearics can be fully relieved of Spanish acquisition tax under the statutory conditions, both for gifts and inheritances. This is based on Art. 54 and Art. 36 DL 1/2014, as amended by Ley 6/2025. Different rules apply to other relationship groups, particularly Art. 36 bis in the case of inheritance.

The calculation combines these Balearic provisions with the Spanish inheritance and gift tax law, income tax law, and the local finance law, as well as the German rules on tax liability, tax classes, allowances, tariff, and credit under the ErbStG. The inheritance comparison is supported from 25.07.2025. The chosen reference date is decisive; you can find the applicable legal status and sources on the calculator.

Frequently asked questions

Related calculators

For the Spanish side, you can calculate the inheritance tax with further personal deductions or go through the tax implications of a gift in more detail. If further assets belong to the estate, you can consider the German and Spanish inheritance tax together, including the credit.