Inheritance from Germany Spain Tax: What Mallorca Residents Really Pay

Anyone who lives on Mallorca as a resident and receives an inheritance from Germany – a flat in Munich, a savings account in Hamburg, a share in a woodland plot in Brandenburg – finds themselves caught in a tax pincer movement: thanks to unlimited tax liability, Spain taxes the worldwide assets, while at the same time the German tax office also wants its share. There is no double taxation agreement between the two countries that regulates this conflict for inheritance and gift tax. This guide explains when Spanish inheritance tax (Impuesto sobre Sucesiones y Donaciones, ISD) actually applies, what advantages the Balearic special rule offers for close relatives, how Modelo 650 works, and how tax paid in Spain can be credited in Germany.

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Why an inheritance from Germany becomes relevant in Spain at all

What matters is not nationality, but the heir's habitual residence (residencia habitual) at the time of the inheritance. If you live permanently on Mallorca, unlimited tax liability (obligación personal de contribuir) applies: everything you inherit – regardless of where in the world the asset is located – is in principle subject to Spanish inheritance tax. A German who has been resident on Mallorca for years therefore pays Spanish inheritance tax even if the entire inherited estate is located in Germany.

If, on the other hand, you continue to live in Germany and merely inherit a Spanish property or a Spanish bank account, limited tax liability (obligación real) applies: only the assets located in Spain are taxed there.

Please note: German nationality does not protect you from Spain's unlimited tax liability. What is decisive is exclusively the habitual residence at the time of the inheritance.

No double taxation agreement – the biggest misunderstanding

Unlike income tax, where a double taxation agreement between Germany and Spain applies, in the field of inheritance and gift tax there is no such agreement. This means, in concrete terms: both Spain and Germany can tax the same inheritance case, without a treaty automatically ruling out double taxation. There are indeed mutual crediting options under each country's national law – but first an inheritance tax declaration must be submitted in both countries, regardless of whether tax ultimately has to be paid in both countries or not.

For German heirs who have paid inheritance tax in Spain, Art. 21 of the German Inheritance Tax and Gift Tax Act (ErbStG) allows, upon request, a credit of the foreign tax against the German inheritance tax – however, only to the extent that the foreign assets are also subject to German inheritance tax, and only proportionally for the assets concerned.

Note: The order is important: the Spanish inheritance tax declaration should generally be filed first, so that the Spanish tax paid is available as a basis for crediting in the German declaration.

The Balearic special rule: 100% relief for close relatives

The Balearics are among the most tax-generous regions in Spain for inheritances between close relatives. With Decree-Law 4/2023 of 18 July 2023 and the subsequent Law 11/2023 of 23 November 2023 (adjusted by Decree 1/2014 of 6 June 2024), a tax relief of 100% of the estate value was introduced for spouses, children, adopted children, parents and grandparents. In effect, an inheritance to this group of people is thus tax-free – provided the formal requirements are met.

Before this reform, parents, children, spouses as well as grandparents and grandchildren paid only 1% on an inheritance of up to 700,000 euros; above that, the rate rose progressively to 8%, 11%, 15% and finally 20%. For all other heirs, the applicable rate before the reform ranged between 7.65% and 34%, depending on the value of the inherited assets minus debts.

An important point was also corrected during the drafting process: originally, the relief only applied to heirs resident in the Balearics, which was in breach of EU law, as non-residents – for example, children living in Germany of a deceased Mallorcan resident – were disadvantaged. Since the amendment in November 2023, non-residents also benefit from the rule.

Right of choice for non-residents: state or Balearic law

Anyone who is not resident in Spain but inherits Spanish assets (such as a holiday property on Mallorca) must in principle declare inheritance tax in Madrid under state inheritance tax law. However, state law only provides children and spouses with a personal allowance of 15.956,87 Euro – without the more extensive Balearic tax benefits.

This is exactly where a closer examination pays off: every person not resident in Spain has the option to choose the law of the Autonomous Community in which the property is located instead of state law – on Mallorca, therefore, Balearic law with its 100% tax benefit for close relatives. This right of choice can make a significant financial difference.

Note: Whether Germans with ties to Mallorca can opt for the more favourable Balearic rules depends on the individual case – as a rule, however, this is possible.

Which inheritance law applies: EU Succession Regulation and choice of law

Alongside the tax aspect, there is the civil-law question of which inheritance law applies at all. Since August 2015, the EU Succession Regulation (EU Regulation 650/2012, known as "Brussels IV") has, in principle, determined that the habitual residence of the deceased at the time of death is decisive – no longer automatically nationality. A German whose last habitual residence was on Mallorca therefore generally falls under Spanish inheritance law.

However, the regulation allows a choice of law (professio iuris): you can stipulate by will that the law of your home country – i.e. German inheritance law – should apply to your estate instead. This choice affects the civil-law succession (who inherits, forced heirship shares, etc.), not automatically the tax treatment, which continues to follow Spanish tax law if you are resident in Spain.

Important: A Spanish will with a clear choice of law considerably simplifies the process and avoids uncertainties with notaries and courts. More on this in the guide on the Spanish will.

Gifts are affected too: the Balearics abolish gift tax

Anyone wishing to transfer assets during their lifetime now benefits even more from Balearic tax policy. Under the 2025 Budget Act (Gesetz 6/2025 of 23 July 2025), the Balearics have effectively suspended gift tax for close relatives with effect from 25 July 2025. Lifetime transfers of assets between parents, children, grandchildren and spouses are therefore practically tax-free – the rule applies equally to residents and non-residents.

An interesting time window arises from this for the succession planning of German owners in Mallorca: instead of waiting for the case of inheritance, an early gift among close relatives can be more tax-attractive – however, the civil-law and forced-heirship consequences should definitely be examined separately.

Modelo 650: How the declaration process works

The Spanish inheritance tax is declared via Modelo 650. As a general rule: the tax must be declared in both countries if both German and Spanish assets are involved.

1. Obtain the death certificate and certificate of inheritance (Erbschein) – as the basis for all further steps.
2. Determine and value the estate assets – including property, accounts, and securities, both in Germany and in Spain.
3. Clarify the applicable law – for residents, Balearic law applies automatically; for non-residents, check whether there may be a right to choose between state and regional law.
4. Prepare and submit Modelo 650 – to the competent tax authority (for residents, generally the Balearics; for non-residents with Spanish assets and residence in Germany, generally Madrid, unless another right of choice is exercised).
5. Prepare the German inheritance tax return in parallel – including proof of the tax paid in Spain for later crediting.
6. Apply for crediting under Art. 21 ErbStG – as soon as the Spanish tax assessment is available.

Note: Exactly where the declaration must be submitted depends on the heir's place of residence and the location of the assets. For someone who is not tax-resident in Spain, whose heirs likewise do not live in Spain, the declaration is generally made under state law in Madrid.

Property valuation: the reference value and the 120% limit

An important restriction applies for the full 100% relief in the Balearics: the tax value of the property, as stated in the public deed for the Aceptación de Herencia (acceptance of the inheritance), must not exceed 120% of the so-called reference value. If this value is exceeded, the extensive tax relief is lost.

In practice, this means: when the inheritance is notarised, you should carefully check together with a Spanish tax advisor which value is applied to the property – too high or too low a valuation can become costly for tax purposes.

Most common mistakes with inheritance from Germany

• Declaring in only one country. Because no double taxation agreement exists, a declaration must, in principle, be filed in both countries – even if, in the end, tax is only actually due in one country.
• Overlooking the right of election as a non-resident. Anyone who automatically declares under state law may be giving up the Balearic 100% tax relief.
• Ignoring property valuation. If the 120% reference value is exceeded, the generous tax exemption no longer applies – often unnoticed until a tax audit.
• Missing will with a choice of law. Without a clear professio iuris, the law of the last habitual residence automatically applies, which can lead to unexpected results.
• Forgetting the credit in Germany. Without a timely application under Art. 21 ErbStG, the tax paid in Spain goes unused, risking genuine double taxation.

What happens next? After the tax return

After submitting Modelo 650 and receiving a tax assessment, you should keep the assessment as evidence for the German inheritance tax return. For properties in Mallorca, the land registry (registro de la propiedad) is then usually updated to reflect the new owner(s). For ongoing tax obligations as a resident – such as the annual income tax return – it's worth taking a look at our guide on Taxes as a Resident. Anyone who does not yet have a fixed residence but inherits a property should also be aware of the rules on Non-Resident Tax.

Checklist: Inheritance from Germany as a Mallorca resident

• Clearly determine habitual residence at the time of death (unlimited vs. limited tax liability)
• Check whether there is a right to choose between state and Balearic law
• Document the degree of kinship to the deceased (decisive for the level of tax relief)
• Have the property valuation checked against the 120% reference value limit
• Submit Modelo 650 to the relevant authority on time
• Prepare the German inheritance tax return in parallel
• Apply for the credit under Art. 21 ErbStG in good time
• Consider a Spanish will with a choice of law to make future inheritance cases easier

Conclusion: Two countries, one inheritance – good advice pays off

An inheritance from Germany hits Mallorca residents with full tax force, because unlimited tax liability covers worldwide assets and no double taxation agreement automatically prevents double taxation. At the same time, the Balearics offer attractive planning opportunities with their 100% tax relief for close relatives and the abolition of gift tax for this group – provided the right of election is used correctly and formal conditions such as the 120% reference value limit are observed. Anyone who plans early, draws up a will with a clear choice of law, and submits both tax returns in a coordinated manner avoids the costliest mistakes in this complex German-Spanish tax field.

Official sources

• Ley 29/1987, de 18 de diciembre, del Impuesto sobre Sucesiones y Donaciones (BOE)
• Real Decreto 1629/1991, de 8 de noviembre, Reglamento del Impuesto sobre Sucesiones y Donaciones (BOE)
• Ley Orgánica 8/1980, de 22 de septiembre, de Financiación de las Comunidades Autónomas (BOE)