Inheritance tax Balearic Islands: tax rates, allowances and rebates in the table

Anyone who owns a property on Mallorca, Ibiza, Menorca or Formentera will sooner or later ask what their heirs will actually have to pay. Inheritance tax in the Balearics is governed by its own table, which has differed significantly from many other Spanish regions since the reform at the end of 2023: thanks to a 100 per cent tax relief, spouses, children, grandchildren and parents effectively no longer pay any inheritance tax at all. German nationals are, at around 35 per cent, the largest group of foreign property owners in the Balearics, ahead of Britons (20 per cent) and French nationals (8 per cent) – for them, this regulation is particularly relevant. In this guide you'll learn what tax classes exist, how high the allowances and tax rates would be without the relief, where the 120 per cent threshold on the reference value lurks, and what has changed since July 2025 for siblings, nieces, nephews and gifts.

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Legal basis: who regulates what?

Spanish inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones, ISD) is a national tax whose specific structure – allowances, tax relief, tax rates – has largely been devolved to the autonomous regions. The basis for this is the national law Ley 29/1987 of 18 December on inheritance and gift tax. The Balearics have made use of this through the Balearic Inheritance Tax Act (most recently codified in Decreto Legislativo 1/2014) and have tightened it further several times in 2023 and 2025.

The most important reform came through Law 11/2023 of 23 November 2023 and the preceding Decree-Law 4/2023 of 18 July 2023: since then, close relatives – spouses, children, parents, grandparents and adopted children – have benefited from an almost complete tax exemption. In July 2025, a further adjustment followed, which also covers more distant relatives (siblings, nieces, nephews, stepchildren, children-in-law) as well as gifts.

Note: There is no double taxation agreement between Germany and Spain for inheritance tax. Balearic law governs only the Spanish tax burden – you must check German inheritance tax separately.

The four tax classes (groups) in the Balearics

National law divides heirs into four kinship groups. This classification determines which allowance and which tax relief applies.

Please note: Unmarried, unregistered life partners fall under Group IV. They do not benefit from the 100 percent bonus, even if they have lived together for years. Anyone wishing to plan ahead here should arrange to have a Spanish will reviewed early on, and if applicable a choice of law under the EU Succession Regulation.

Allowances at a glance

Before the tax rate and bonus are applied, a personal allowance is first deducted from the value of the estate. In the Balearics, these allowances are somewhat higher than under the basic national law.

By comparison: in Germany, personal allowances range between €20,000 and €500,000, depending on the degree of kinship. Anyone living in Germany or who was tax resident there may therefore also need to bear the German allowances in mind.

Tax rates without the bonus: the basic tariff

Before the 100 percent bonus applies, the basic tariff is first calculated on paper. It shows how high the tax burden would be without the Balearic reductions – important for anyone who does not fall into Group I or II.

Depending on the size of the inheritance share, the statutory tax rate ranges from 7.65 percent to 34 percent.

In addition to the basic tariff, the Spanish state applies so-called multipliers depending on the degree of kinship and the heir's pre-existing wealth, which can further increase the tax burden if no bonus applies – for example for Groups III and IV. For Groups I and II in the Balearics, this basic tariff has become practically irrelevant since 2023 due to the 100 percent bonus.

The 100 percent bonus since 2023: how it works

The real highlight of the Balearic reform: for spouses, children, grandchildren, parents, grandparents and adopted children, the calculated tax is waived in full – 100 percent. In effect, this means that inheriting property – such as a home on Mallorca – by these persons is exempt from inheritance tax, with no upper value limit whatsoever.

However, there is an important restriction concerning property:

Attention – the 120 percent reference value limit: The tax value assigned to a property when accepting an inheritance must not exceed 120 percent of the so-called reference value (the cadastral reference value). If this value is exceeded, the far-reaching tax benefit is lost. Before accepting an inheritance, always have the reference value checked by a specialist lawyer or tax advisor.

Reform July 2025: Gifts and Group III

Since 25 July 2025, the benefit has been expanded in two important respects:

1. Gifts (Donaciones): Since then, the 100 percent bonus also applies to lifetime gifts between the eligible groups, no longer just to inheritances after death.
2. Group III: Here, since 25 July 2025, a bonus applies to the cuota íntegra corregida, tiered according to the degree of kinship (Art. 36 bis Decreto Legislativo 1/2014):

Important for classification: These 60 and 35 percent are bonuses on the tax liability, not tax rates. Many explanations confuse this. So there always remains a residual amount to pay — unlike Groups I and II, whose relief amounts to 100 percent.

For lifetime gifts, the corresponding rule has applied since the same date: Groups I and II receive a 100 percent deduction on the cuota líquida, Group III 60 or 35 percent depending on the case group.

Note: Before July 2025, there was practically no significant allowance for gifts in the Balearics – gifts were considerably less tax-attractive than inheritances. Anyone wishing to transfer a property during their lifetime should check the current legal situation with a specialist lawyer before concluding a contract.

Non-residents: choosing state or Balearic law

Not every heir with assets in the Balearics also lives there. In principle, state rules apply to non-residents – however, since 1 January 2015, they can, under certain conditions, choose to apply the law of the region where the largest part of the estate by value is located. So if a property on Mallorca or Ibiza is at the centre of the estate, a German heir resident in Germany can generally take advantage of Balearic law – and thus the 100 percent relief. Since 1 January 2016, a separate Balearic tax table has also applied to these cases.

You can find out more about your tax residency in the article Inheritance tax for residents and in the guide Certificado de Residencia Fiscal.

Double taxation: Germany and Spain without an agreement

Unlike with income tax, there is no double taxation agreement between Germany and Spain for inheritance and gift tax. This means: a property on Mallorca that falls into the estate of a German citizen is, in principle, subject to both Spanish and German inheritance tax, unless the deceased was exclusively tax resident in Spain. There are mutual crediting options under the respective national law, but initially a declaration must be filed for the same property in both countries.

Since the Balearic relief reduces the Spanish tax for Group I/II to zero, in practice often only German inheritance tax remains relevant – with the allowances applicable there ranging between €20,000 and €500,000. You can find details on this in the guide Double Taxation Agreement Germany–Spain as well as Inheritance from Germany: tax in Spain.

Procedure: tax return despite the bonification

Even if the tax burden is zero thanks to the 100-percent bonification, the obligation to file a tax return does not disappear. Heirs must declare the inheritance using form Modelo 650 (inheritance) or, in the case of gifts, Modelo 651.

1. Gather the death certificate, will or certificate of inheritance, and the NIE number of the heirs.
2. Determine the value of the estate; for property, check the reference value with the Kataster (note the 120-percent limit).
3. Complete form Modelo 650 or 651 and apply for the bonification for Group I/II or the reduction for Group III.
4. Submit the declaration to the competent tax authority – even if the tax liability is zero.
5. Provide proof of the submitted declaration for the change of ownership in the Grundbuch and at the Kataster.

Note: Without the submitted and certified declaration, an inherited property generally cannot be re-registered in the Grundbuch in the new owner's name – the bonification exempts from payment, not from the formality.

For more complex estates (several heirs, assets abroad, company shares), it is advisable to arrange an appointment with the tax authority early on via Cita Previa Hacienda or to engage a Gestoría.

Comparison with other Spanish regions

Thanks to the 100-percent bonification, the Balearic Islands are among the most favourable regions in Spain for close relatives – but they are not the only region with special rules.

Most common mistakes

• Overlooking the reference-value limit: If the property value is set above 120 percent of the reference value when accepting the inheritance, the entire 100-percent bonification can be lost.
• Forgetting to file despite zero tax liability: Even with full bonification, filing Modelo 650/651 remains mandatory – without it, the change of ownership in the Land Registry is often blocked.
• Overlooking German inheritance tax: Because no Spanish tax applies in the Balearic Islands, people often forget that a declaration and payment obligation may still exist in Germany.
• Misclassifying unregistered life partners: They fall under Group IV and do not automatically benefit from the bonification for spouses.
• No will in place: Without a will, statutory succession applies, which can complicate the allocation to tax classes and thus the bonification.

What comes next?

After the tax return has been filed and the bonification applied, further steps usually follow: the change of ownership of the property in the Land Registry and Cadastre, the re-registration of accounts and contracts, and – depending on the heirs' place of residence – checking further reporting obligations, such as for assets held abroad. Anyone who takes care of their will early on can significantly simplify many of these steps for their own heirs. You can find a first overview of the necessary formalities after a death in the guide Death on Mallorca.

Checklist: Inheritance tax Balearic Islands

• Tax class (Group I to IV) of the heir correctly determined
• Allowance for the respective group determined
• Reference value of the property requested from the Cadastre and compared against the 120-percent threshold
• Bonification (100% or reduction for Group III) applied for on the form
• Modelo 650 or 651 submitted on time
• German inheritance tax liability checked separately
• Documents, if applicable, translated with an apostille
• Will or choice of law under the EU Succession Regulation documented

Conclusion

Since the 2023 reform, inheritance tax in the Balearic Islands has been one of the most favourable arrangements in the whole of Spain: spouses, children, grandchildren and parents now pay virtually no inheritance tax at all thanks to a 100 percent bonification, and since July 2025 this also applies to gifts, with even siblings, nieces and nephews now benefiting from relief. Anyone who keeps an eye on the details – the reference-value threshold, the correct tax class, the reporting obligation despite zero tax, and the German inheritance tax liability that still applies – can save their heirs a great deal of hassle and money. For the specific calculation and the choice of the appropriate law, it is almost always worth seeking advice from a specialised tax adviser or lawyer on the ground.

Official sources

• Ley 29/1987, de 18 de diciembre, del Impuesto sobre Sucesiones y Donaciones – https://www.boe.es/buscar/act.php?id=BOE-A-1987-28141
• Decreto Legislativo 1/2014 (codified Balearic inheritance tax law) – https://www.boe.es/buscar/act.php?id=BOE-A-2014-6925